Featured Stories:
Retirement Revealed: Cultural influences impact retirement decision making
Ferik: Distress over security an opportunity for industry to lead
What keeps women business owners up at night?
Customer satisfaction ratings for insurance companies
Guardian Life to hire 800 financial representatives in 2012
3 in 4 women small business owners predict tougher times
Small business owners show bias for same-gender advisors
American General's new 'Rapid rater' mobile app
Vossenberg: Solving for Financial Inertia
RIIA announces February RMA seminar
Retirement Revealed:
Cultural Influences Impact
Retirement Planning and Decision-Making
Research finds non-whites more likely to rely on the media and Internet for information;
Hispanics feel least prepared for retirement
February 2, 2012
ING U.S. released key findings today from a comprehensive study commissioned by the ING Retirement Research Institute that examined the attitudes, behaviors and preparedness of different ethnic groups, including African-Americans, Asians and Hispanics, regarding their future retirement. The research showed that while Americans of all backgrounds encounter similar barriers to saving and planning, cultural differences account for disparate experiences among the groups. For additional information or to view the report, go here.
According to the study, Retirement Revealed, all populations found retirement planning to be a daunting task. However, ING’s research showed that Hispanics feel the least prepared, with 54% indicating they feel 'not very' or 'not at all' prepared. This compares with 50% of African-Americans, 48% of white and 44% of Asian respondents indicating that they don't feel prepared. These feelings correspond with the amount saved in employer-sponsored retirement plans, where Hispanic respondents reported having the lowest average balances ($54,000) in their retirement plans. This amount was considerably less than the average balance across all groups ($69,000). In contrast, Asian respondents reported having the highest average plan balances ($81,000).
"All Americans face the growing responsibility of planning and saving for retirement. However, there are distinct cultural differences that may affect some groups more than others when it comes to getting or staying on the right path," said Maliz Beams, CEO of ING U.S. Retirement. "As a leading retirement provider at the workplace and in the retail market, our mission is to help individuals retire with the dignity and financial security they deserve. Our goal is to take the important cultural reference points from this study and turn them into customized solutions that help all our customers become better prepared- regardless of their background."
Other key findings from the Retirement Revealed study include the following:
Financial Information
- Non-whites were more likely than whites to get their investment information and guidance from the Internet and media. African-Americans (54%), Asians (53%) and Hispanics (50%) indicated that the media and Internet were the primary source of getting advice and guidance compared to 45% of white respondents.
- Whites were more likely to use a financial professional.
- While nearly one-in-three (28%) of overall respondents are currently working with a financial professional, only three-quarters (75%) of this group indicated their adviser looks at their complete financial picture.
- Face-to-face communication with a financial professional is ranked the highest in terms of value provided in getting information about their retirement plan and other employee benefits.
Barriers to Saving
Nearly three-quarters (73%) of respondents admitted to having barriers to saving. Among the groups, African-Americans said debt was their biggest barrier. Needing to know more about their savings options is a greater barrier to savings for Hispanics than for any other group.
Planning Goals
- Hispanic respondents were less focused on their future retirement goals- well over half (57%) have never calculated how much money they will need to continue their current lifestyle upon retirement.
- Seven-in-10 (70%) Hispanics did not have a formal investment plan to reach those goals.
- Only three-in-10 (29%) of overall respondents have a formal investment plan; African-Americans are most likely to have one (32%); whites are least likely (28%).
Emergency Savings
- Just under half (41%) have virtually no emergency savings (one month or less). This increases to nearly half for Hispanics (47%) and 50% for African-Americans, while only one-in-four Asians have one month or less saved for emergencies.
Purchasing Priorities
- Asians appear to be most prepared for retirement, but had a tendency to place a higher priority on lifestyle choices, such as purchasing a nice house or car, than planning for retirement.
"There are certainly more similarities than differences among the ethnic groups when it comes to retirement planning, but distinctions do exist and understanding them can be critical to future retirement success," added Fabian Gonzalez, vice president of Multicultural Sales at ING U.S. "For example, many times in the Hispanic community, parents will sacrifice their own financial future in order for their children to advance. By researching and learning about the rationale behind decisions like this, we can better understand our customers and help them achieve their financial goals."
Additional findings from the study include:
- Nearly one-in-four African-Americans (23%) have life insurance coverage equal to four to five times their salary, higher than the total population (18%). This corresponds with African-American respondents indicating that they were the most likely to leave life insurance proceeds to their heirs (70% vs. 53% of the total sample).
- More than six-in-10 (63%) of African-Americans cite reducing debt as their most important short-term financial goal.
- Hispanics are the most likely (57%) to want more education about investments and retirement options from their employer, compared to all respondent groups (47%).
- Asians are the least likely to have a last will and testament (26%), compared with 31% for Hispanics and 37% for white respondents.
For additional information on the ING's Retirement Revealed study and to read the report, go here.
Societal Distress over Long-Term Security
an Opportunity for Industry to Lead
How to combat a high level of financial planning paralysis
By Michael Ferik, FSA
Michael Ferik, FSA, is Senior Vice President, Individual Life, at The Guardian Life Insurance Company of America. He can be reached at Michael_Ferik@glic.com. The Guardian national survey among U.S. respondents cited in this article was conducted by Penn, Schoen & Berland Associates using 1,202 telephone interviews between September 27 and October 9, 2011.
In recent years, Americans have been exhibiting some rather worrisome behavior. This shouldn't come as a complete surprise, given the succession of jolts the nation has experienced since the financial crisis hit in 2008. Between the Great Recession, near-10% unemployment and the feeblest of economic recoveries, it's no wonder that the public is perplexed, frustrated and fearful. What's concerning is the high level of financial planning paralysis settling upon the nation as a whole. At every stage of life, people are overwhelmed by the prospect of making key decisions and planning for the future. It's almost as if they have sought refuge through inaction.
The results of a recent Guardian study, Financial Guidance for the Whole Life: Generations Y, X and Boom, confirmed this trend:
- A large majority - 75% - said they felt pessimistic about the economy.
- Almost 60% of the participants said they were less likely to take financial risks in the current economic climate. A significant minority - more than 25% - has grown mistrustful enough of financial markets to dump stocks altogether. We found almost two-thirds of Americans preferred to keep their money in savings accounts for perceived safety rather than risk the ups and downs of other investments.
- While nearly all respondents - 92% - of our respondents said they were very or somewhat confident in their personal financial decision making, almost four in ten - 39% - don't even know where to begin when it comes to planning for retirement.
- Some 70% of those surveyed have every intention to save more and spend less. Still, the results showed that people aren't at all clear about which way to turn: Just 31% planned to consult with a financial planner; 26% were considering taking greater advantage of their employee benefits; and 26% indicated they would be re-evaluating their life insurance needs.
These numbers are even more troubling when considered by age group, particularly for Generation X (ages 35-47), a slice of the population that should be firmly headed toward its peak earning years and raising families. This cohort has been significantly more shaken than its Baby Boomer elders and younger Generation Y siblings and co-workers (82% feel the economy is headed in the wrong direction, compared to three-fourths of the general population), and feels the least financially secure - 47% - of any generation (37% overall).
Gen X members are also the most concerned - 59% - that they will not have enough money saved for retirement, but are also the most skittish: While most respondents - 60% - believe it is important to keep investing in their retirement fund during periods of economic instability, 47% of Gen Xers believe investing in their retirement fund is actually less valid at this time.
The Responsibility of our Era
We live at a time when none of us can afford to hide. Over the last 30 years, more and more of the responsibility of actively managing personal and household finances has shifted from institutions to individuals. Today, we must each pore over options and make informed decisions about how to save, allocate and protect our resources. What's more, with the landscape shifting so dramatically, Americans must regularly reassess those decisions. Gone are the days when a defined benefit pension was the golden rule for retirement planning. Our clients shoulder more of the responsibility for saving money to last through 30 years of retirement through 401(k) plans, life insurance and other financial vehicles which require their active participation in determining contributions and asset allocations. Annual increases in healthcare costs have forced companies to shift a greater share of the load to employees who now must exert more effort in selecting plans, providers, deductibles and health savings accounts. Leaner times have reminded us all of the need to protect our sources of income and lifestyles as well.
For producers and advisors - and the companies they represent - the current situation is nothing less than a call to action. Clearly, our industry is best situated to empower clients and prospects to address the current reality with confidence. The upside is that we are already well-equipped with a wide array of products and services to put clients at ease and launch them on the way to better shape their financial destinies. The challenge then, is how we can stir Americans into taking action.
Clearing Away Misperceptions
We'll first have to push aside several obstacles.
One is ignorance. We won't get very far until we clear away a lot of confusion about what we have to offer. Take the subject of life insurance, for instance. The Guardian survey showed that people today have placed greater value on safety and the ability to protect what they already have. That would appear to be a boon to life insurance as a solution fit for the times. And yes, LIMRA statistics show industry whole life sales up 10% for the first nine months of 2011 over figures for the previous year.
Still, not everyone is getting the message. According to Financial Guidance for the Whole Life: Generations Y, X and Boom, only 68% of the general population said they have any kind of coverage. (Not surprisingly, those earning $100K+ are significantly more likely - 83% - to own life insurance.) Many consumers do not fully understand concepts that we in the industry may think are pretty basic: For example, half of the general population in our survey admitted they can't differentiate between whole life and term insurance.
Another challenge is the public's desire for instant gratification. In an age when purchases - even for certain types of financial products - can be made with the click of a mouse, it's understandable that Americans might expect that applying for life insurance should be swift and simple. They may not want to invest the time to understand the specific product features that make their coverage so personal and ultimately valuable.
Thirdly, there's the crisis of confidence that now has a firm grip on our nation's psyche. It's impossible to escape dire news reports on the economy, domestically and abroad. Ordinary citizens are internalizing the many shockwaves destabilizing global financial markets day after day. It's to be expected that they are collectively feeling as if they are at the mercy of outside forces that have the world in a tizzy. They're convinced there is nothing they can do but duck and cover.
Our industry can lead the way in countering this feeling of helplessness. Times of macro uncertainty, after all, can be countered by micro measures. In many cases our clients and prospects don't realize they can protect themselves by putting their finances in order and setting up the right coverage to safeguard themselves and their loved ones. A U.S. budget impasse doesn't have to topple an individual household.
Change from the Grassroots Up
In trying times like these, it's important to return to core values. Our mission has always been to guide families and individuals to a better life. The financial tools and solutions we offer can restore confidence at the individual level to an uncertain nation. We don't need to reinvent anything, just perhaps to refine the messages around our value proposition a bit.
I see times like these as an opportunity for our industry to spark up a groundswell. The very fact that our business, by and large, is not transacted on the internet but on a very personal, face-to-face level means that we are uniquely positioned to inspire grassroots changes in the way our society views individual fiscal responsibility. After all, if consumers are willing to devote more time and thought to their $4 high-end coffee purchase than they do to protecting their long-term security, is it any surprise that the broader economy also seems to have misplaced its priorities?
With support from their home offices, advisors can be at the front line of this social change, driving home the notion that our collective efforts to take small, achievable steps toward financial literacy can indeed make for a fiscally stronger society across the board. As 2012 gets underway, it's time for our industry to lead the charge toward fiscal responsibility, one household at a time.
What keeps women business owners up at night?
A 10-point questionnaire to help pinpoint your challenges
BRYN MAWR, PA - New research released by The American College the nations largest non-profit educational institution devoted to financial services, indicates that the majority of women business owners fall into one of four major categories that describe their financial goals and needs. These categories reflect different levels of stress, abilities to achieve work/life balance and individual confidence.
Ninety-five percent of survey respondents fell into one of these four profiles:
- Sleeping Soundly - The Sleeping Soundly segment makes up 31 percent of the respondents. These women feel that being an entrepreneur has met their expectations. They enjoy a good work/life balance as well as managing the financial aspects of their businesses. They are confident about their present financial stability and feel they have planned well for the future. Their business revenues are the highest of all the groups.
- Tossing & Turning - Fifteen percent of study participants are extremely stressed by their businesses. They report that being a business owner is not what they expected and worry about almost every aspect of owning a business. They report a lack of work/life balance and overwhelmingly feel their business takes away from important time with family and friends.
- Sleeping With One Eye Open - This segment is made up of 16 percent of the study's respondents. They are not focused on planning for future events such as retirement or transitioning their business to family members. They have the lowest reported business revenue and the fewest employees. Despite this lack of planning, they report a high sense of contentment with their work/life balance and feel that their business meets their expectations.
- Dreaming About The Future - One third (33 percent) of these female entrepreneurs report that their business is in a moderate or stable growth stage. They report a good work/life balance with enough time for family and friends. Their motivations are to grow their business while maintaining financial stability and transitioning to financial independence (retirement). They are comfortable taking risks.
In an effort to help women small business owners determine which of these four categories they might fall in, the State Farm Center for Women and Financial Services at The American College, the independent academic entity that conducted the study, constructed a simple self-test. This 10 question quiz can help female entrepreneurs better understand where they are and how they can improve. Copies of the What Keeps Women Business Owners Up at Night? quiz can be downloaded here.
"Women business owners can do more to improve their financial security when they identify priorities for their work and home lives, implement prudent cash management practices and create plans to both grow and protect their wealth," said Mary Quist-Newins, ChFC, CLU, CFP, Director of the State Farm Center for Women and Financial Services at The American College. "Engaging a competent and trustworthy financial professional (and/or team) can provide tremendous benefits, as indicated in this and other studies. With sound financial planning, more women business owners can begin 'sleeping soundly' instead of 'tossing and turning' all night long."
Methodology:
This survey was conducted online within the United States by Ipsos on behalf of the State Farm Center for Women and Financial Services at The American College, between July 13, 2011 and July 22, 2011. 1,255 interviews were conducted (835 women and 420 men) among a random sample of panelists from reliable commercial research panel resources. 'Business owners' were defined as individuals who own 50 percent or more of the business and who make or share in financial and other business decisions. All the businesses contacted in this survey have been in operation for three or more years and have annual business revenue of $50,000/year or more. A full methodology is available.
About The American College:
The American College is the nation's largest non-profit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has served as a valued business partner to banks, brokerage firms, insurance companies and others since 1927. The American College's faculty represents some of the financial services industry's foremost thought leaders, including the State Farm Center for Women and Financial Services, the first and only academic institution devoted exclusively to the study of women and financial services. For more information, visit TheAmericanCollege.edu
Customer Satisfaction Ratings for Insurance Companies
How consumers feel about the BIG players
Foster City, CA - A new national study of satisfaction ratings conducted by insure.com provides a comprehensive view of how consumers feel about the largest auto, home, health and life insurance companies in the U.S.
In addition to the survey results, Insure.com has released a Best Insurance Companies tool which allows consumers to see how their insurer measures up against the competition when it comes to customer satisfaction. The tool breaks out five measurements of satisfaction:
- Customer service
- Claims experience
- Value for the price paid
- Percent who plan to renew their policies
- Percent who would recommend their companies
"This is an in-depth resource for consumers who are considering their insurance options," said Amy Danise, Insure.com's Editorial Director. "Our analysis lets consumers gain valuable insight into how the major companies are performing on five important levels of customer satisfaction."
Insure.com also awarded its People's Choice Award to the three highest-scoring insurers in each line of business included in its study.
Best car insurance companies
- USAA
- Auto-Owners Insurance
- The Hartford
Best home insurance companies
- USAA
- Amica Mutual
- Chubb
Best life insurance companies
- Ameriprise Financial
- TIAA-CREF
- Transamerica
Best health insurance companies
- Blue Cross Blue Shield of Illinois
- Horizon Blue Cross Blue Shield of New Jersey
- Kaiser Permanente
Insure.coms analysis of the customer ratings revealed that insurance consumers are generally satisfied with their companies:
- Most consumers are 'completely' or 'somewhat' satisfied with their auto insurers' customer service.
- 73 percent are satisfied with home insurance customer service.
- 63 percent are satisfied with their life insurers' customer service.
- 61 percent are satisfied with their health insurance customer service.
- 70 percent say they have recommended or would recommend their auto insurance company.
In other categories, people who have recommended or would recommend their insurers totaled 67 percent for home insurance, 58 percent for health insurance and 50 percent for health insurance.
For complete details and to use Insure.com's Best Insurance Companies tool to explore customer satisfaction ratings, go here.
Guardian Life Hiring over 800 Financial Representatives in 2012
Active Recruitment of Career Changers and Job Seekers
NEW YORK, - While many highly qualified unemployed and underemployed business professionals struggle to find job opportunities; others are building new and fulfilling careers as financial representatives (FRs) in the insurance industry.
Throughout 2012, the Guardian Life Insurance Company of America, will be hiring over 800 financial representatives by targeting and recruiting career-changers as part of its distribution force recruitment strategy. Guardian Life recognizes that these individuals possess the skills needed to prosper in the challenging and competitive life insurance field.
"Even before the economic downturn, many of Guardian Life's Financial Representatives came to us after successful careers in other industries," said Meg Skinner, Chief Distribution Officer at Guardian Life. "Unlike employers with a more traditional view of the job market, we welcome career changers and experienced professionals who may have recently experienced a downsizing or who are working in unfulfilling jobs where their skills are undervalued. Their skills are highly valued here at Guardian, and we've empowered them to make better career choices."
Guardian Life is one of several insurance industry employers hiring during the economic downturn, which may surprise some. The rise in demand for qualified sales reps is driven in part by a rise in demand for more secure and reliable financial products not as adversely affected by the turbulent economy such as Guardian's Whole Life insurance. "The same economic issues causing problems in other industries make the secure, reliable products Guardian offers an even more valued commodity," Skinner said.
Skinner added, "Many highly competent people are being forced to make tough career choices in today's economy. For the right candidate, a career with Guardian Life will be a positive, life-changing decision."
About Guardian
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America and its subsidiaries are committed to protecting individuals, business owners and their employees with life insurance, disability income insurance, dental insurance products, and offer funding vehicles for 401(k) plans, annuities and other financial products. Guardian operates one of the largest dental networks in the United States, and protects more than six million employees and their families at 115,000 companies. The company has approximately 5,000 employees in the United States and a network of over 3,000 financial representatives in more than 80 agencies nationwide.
For more information about Guardian, please visit: www.GuardianLife.com
Three in Four Women Small Business Owners
Predict More Tough Times in 2012
Sketchy economic outlook has many cautious about adding employee benefits this year
COLUMBUS, Ohio - A new Nationwide Financial study shows three quarters (74 percent) of women small business owners expect their business to be negatively impacted in 2012 by the economy. Just one in five (22 percent) think the state of the economy will improve and one third (34 percent) expect their sales and revenue to decline.
"Small business owners should develop a relationship with a good financial advisor who can help them understand the wide range of options available for supporting their employees with retirement and other benefits"
Based on this cautious outlook, it's not surprising that about a third of women small business owners plan to cut back on hiring (37 percent) and eliminate or delay raises (31 percent) or bonuses (30 percent) within the next 12-24 months, according to the Harris Poll of 501 small business owners released today. Nearly one in five (17 percent) fear they will be forced to lay off employees and only 11 percent plan to add or enhance benefits in the next two years.
The survey also found that only 14 percent of women-owned small businesses currently offer their employees a 401(k) or other employee-funded retirement plan, and only five percent offer a company-funded defined benefit plan. Of those who plan to enhance employee benefits, only 12 percent say they will add an employee-funded retirement plan.
It's not that women small business owners are unsympathetic to the needs of their employees. In fact, eight in ten (81 percent) agree that the lack of preparation for retirement in America has reached crisis levels, and nearly half (45 percent) say offering retirement plans would help them attract qualified workers.
But 69 percent say their businesses are too small to offer retirement plans, and over half (53 percent) say doing so is too expensive.
"Women small business owners, like most of the small business owners we surveyed, may find it hard to invest in new benefits for their employees when they are unsure about the direction of the economy and how it will affect their business," said Anne Arvia, president of Nationwide Retirement Plans. "It's a tough position when you cannot predict or control many of the factors that affect your ability to grow your business and provide benefits to attract and retain employees."
The survey may reveal one opportunity for small business owners concerned with cost. Nearly two in three (65 percent) women small business owners were unaware that some retirement plans do not require employers to match employee contributions.
"That's a common misperception," said Arvia. "An employee-funded retirement plan that does not involve a company match may be worth considering for owners who are concerned about cost, but want to help their employees prepare for the future."
The survey also found that women owners who currently offer a self-funded retirement plan are less likely to offer an employee funded 401(k) than the general sample of small business owners surveyed (46 percent vs. 59 percent), but more likely to offer a SEP (Simplified Employee Pension Plan), with 39 percent doing so compared to 34 percent of all owners.
"Small business owners should develop a relationship with a good financial advisor who can help them understand the wide range of options available for supporting their employees with retirement and other benefits," said Arvia. "Only about one third (34 percent) of women small business owners we surveyed indicated a financial advisor is their primary contact for advice or consultation."
Small business owners may also be interested in learning more about the SAVE Act, a piece of legislation currently before Congress that could make offering retirement plans more affordable for small business owners. The SAVE Act encourages small businesses to pool together to offer Multiple Small Employer Plans (MSEP) that are much less expensive than single employer plans and simplify an employer's administrative requirements. H.B. 4742, sponsored by Ron Kind (D-WI) and David Reichert (R-WA), allows small employers to reduce costs by pooling their resources under a single plan with easier administrative requirements.
"The retirement savings crisis is one of the key issues facing our nation," added Arvia. "These survey results are another reminder of how important it is for retirement plan providers, plan sponsors, and legislators to work together to develop practical solutions to increase access to employer-sponsored retirement plans."
Survey Methodology
On behalf of Nationwide Financial, Harris Interactive Inc. conducted 501 online interviews of small business owners in the U.S. with 1-100 employees, and 202 women small business owners, surveyed August 3-12, 2011. Results are weighted to be representative of U.S. companies with 1 to 100 employees with respect to number of employees.
About Nationwide
Nationwide, based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by A.M. Best. The company provides a full range of personalized insurance and financial services, including auto insurance, motorcycle, boat, homeowners, life insurance, farm, commercial insurance, administrative services, annuities, mortgages, mutual funds, pensions, long-term savings plans and health and productivity services. For more information, visit www.nationwide.com.
Sense of family financial obligation among Americans is strong,
but not unlimited
Multi-Generational Views on Family Financial Obligations
(Westport, CT - January 10, 2012) - Americans' sense of financial obligation to family members is strong and born out of love and generosity, but does have limits, according to a new study by the MetLife Mature Market Institute.
Multi-Generational Views on Family Financial Obligations: A MetLife Survey of Baby Boomers and Members of Generations X and Y reports that Baby Boomers (b. 1946-64), Gen Xers (b. 1965-1976) and Gen Yers (b. 1977-1990) agree that parents should support children through their college years, help with tuition (90%) and step in to provide financial assistance during a financial emergency - not of the child's doing.
They stop short, however, at paying 100% of college tuition if the cost is particularly high, and at bailing their kids out of debt when the debt is from overspending. Fewer feel responsible for contributing to the down payment on a house - just seven percent of those surveyed said they feel an absolute or strong responsibility to do so.
Most Americans also believe that children have some obligation to help their parents financially if necessary, though many parents (42%) say they wouldn't accept money from their children. More than six in ten (62%) believe children should call their parents at least once a week to see how they are doing; 58% say children should have a parent live with them for health or economic reasons (50%). Forty-six percent say they should provide financial support to their elder parents or in-laws if there is a need.
Saving for retirement to avoid dependence on family is important to most who also believe in protecting their families should they die early. Across the generations, nearly four in five (78%) respondents believe there is an obligation to provide for a surviving spouse if one dies unexpectedly. More than half (52%) believe in leaving something for younger children, typically enough to carry them through at least part of college (55%). Six in ten (63%) Gen Y and Gen X respondents feel providing for children is important, compared to 38% of Boomers, likely because many children of Boomers are now adults.
Even given the desire of Americans to leave enough money if they were to die unexpectedly, 41% with life insurance coverage say their coverage falls short or aren't sure they are covered adequately. Gen Xers are most likely to believe they have inadequate coverage (40%), compared to 28% of Boomers and 31% in Gen Y.
"Americans' have a strong desire to help their families financially, but their generosity is not unbounded," said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. "While the research shows money provided to help with specific financial issues is a reflection of love and caring, not a familial mandate or obligation, parents and children are not prepared to give in all instances.
"Even though financial support can be critical in keeping family members afloat, perhaps a better way to enhance strong familial ties is by planning ahead and having discussions early on about financial goals, estate issues and purposeful gifts - such as college funding. Families might also consider professional guidance so they can be assured that they are investing well and are protecting their family members financially, should unanticipated emergencies or premature death occur."
Here are additional findings:
- Boomer parents (75%) are more likely to have provided financial assistance with items other than education or a house, compared to 40% of Gen X parents with adult children. Fifty-seven percent of Gen Yers have received such support from parents or grandparents, compared to 36% of Boomers.
- Only 35% of Boomers say they received support for college tuition from their parents, but all three of the generations studied believe it is their obligation to do so for their children.
- More than four in 10 respondents (44%) say they would feel a strong or absolute responsibility to help an adult child with a financial setback not of their own making. Only 11% feel obligated to help when the situation results from poor spending habits.
- When asked when their financial responsibility to their children ends, parents generally say it's when the children are finished with college and that if kids don't attend college after high school, they should be working.
- Seven in 10 Boomers (70%) say enjoying retirement takes precedence over leaving an inheritance; just 64% of Gen Xers and 57% of Gen Yers agree.
Multi-Generational Views on Family Financial Obligations: A MetLife Survey of Baby Boomers and Members of Generations X and Y can be downloaded from www.MatureMarketInstitute.com. The study can also be ordered here, by writing to: MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880 or by e-mailing MatureMarketInstitute@metlife.com.
Methodology
The online survey of 2,123 Americans, ages 21 to 65, was conducted from June 29 to July 20, 2011. Respondents were selected from among Harris Interactive's online research panel. To qualify, respondents had to have household incomes of at least $40,000 ($30,000 if Gen Y).
Boomers and members of Gen X were required to have a dependent-either a spouse or a child; Gen Yers did not necessarily have dependents. The data was weighted by age, gender, education, and race/ethnicity to best reflect this target population. The online survey was conducted by Mathew Greenwald & Associates, a leading full service public opinion and market research firm that has been providing customized research for clients for over 25 years.
The MetLife Mature Market Institute
The MetLife Mature Market Institute is MetLife's center of expertise in aging, longevity and the generations and is a recognized thought leader by business, the media, opinion leaders and the public. The Institute's groundbreaking research, insights, strategic partnerships and consumer education expand the knowledge and choices for those in, approaching or working with the mature market.
The Institute supports MetLife's long-standing commitment to identifying emerging issues and innovative solutions for the challenges of life. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, please visit: www.MatureMarketInstitute.com.
Small Business Owners Show Strong Bias for
Financial Advisors of Same Gender
Financial industry composition 'out of sync' with future demands of small business owners
BRYN MAWR, PA- According to a new study released by The American College, small business owners prefer to speak to financial advisors of the same sex, with men exhibiting a stronger gender bias than their female counterparts.
Approximately 61 percent of women who are small business owners prefer to speak to a financial advisor who is a woman, yet only 24 percent of men prefer to speak to female financial advisors. According to 2010 data from the Bureau of Labor Statistics, only 30.8 percent of women were personal financial advisors.
Conversely, 75 percent of men prefer to speak to male financial advisors while only 40 percent of women exhibit the same preference. This disconnect between the preference for female financial advisors by women business owners and the gender composition of the financial advising community becomes all the more alarming when looking at the broader American economy.
According to the Center for Women's Business Research, 10.1 million businesses report women owning 50 percent or more of the enterprise. In addition, one in five businesses that earn over $1 million in revenue are owned by women. Women-owned businesses employ more than 13 million people and are estimated to generate over $1.9 trillion in sales.
"The financial services industry needs to do a better job of recruiting, training and retaining women as financial advisors if it is going to successfully meet the demand of women small business owners," said Mary Quist-Newins, ChFC, CLU, CFP, Director of the State Farm Center for Women and Financial Services at The American College, the academic entity that conducted the study. "Failing to diversify could lead to significant missed economic opportunities for financial services companies and reduced levels of financial security for women small business owners."
In other study results:
Women (W) are more concerned about retirement planning than men (M) (84%W vs. 76%M) and report having taken more action to address this issue.
- More women have consulted with a financial advisor about maximizing business owner benefits (44%W vs. 33%M).
- More women have consulted with an advisor about starting a retirement plan (41%W vs. 29%M).
- More women than men list not having enough money in retirement as one of their top three concerns.
- Women and men state that they take an active role in understanding needs in retirement planning (75%W vs. 85%M), however:
- Many have not estimated how much capital they will need to be able to retire (34%W vs. 26%M).
- Only a few have a formal, written financial plan for managing income and expenses in retirement (24%W vs. 34%M) or have a formal, written plan for transitioning their business at retirement (11%W vs. 28%M).
- Most small business owners have not consulted with an advisor about retirement planning (44%W vs. 33%M) but those who have report being satisfied with their advisor relationship (76%W vs. 85%M).
Visit the Women's Center for Business research here.
Methodology
'Business Owners' were defined as individuals who own 50 percent or more of the business and who make or share in financial and other business decisions. All the businesses contacted in this survey have been in operation for three or more years and have annual business revenue of $50,000/year or more. 1,255 interviews were conducted (835 women and 420 men). Margin of error is + or - 3.3 percent for females and 4.7 percent for males.
The American College
is the nation's largest non-profit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has served as a valued business partner to banks, brokerage firms, insurance companies and others for over 85 years. The American College's faculty represents some of the financial services industry's foremost thought leaders, including the State Farm Center for Women and Financial Services - the first and only academic institution devoted exclusively to the study of women and financial services. For more information, visit TheAmericanCollege.edu
American General Life Companies Announces Rapid Rater on Mobile
New quoting APP for IPhone and Android
HOUSTON, TX - American General Life Companies (American General) announced its new "Rapid Rater on Mobile," the new mobile quoting application for iPhone and Android smart phone users.
American General's new state-of-the-art optimized "app" gives producers on-the-go access to Rapid Rater, providing fast, customized quotes for best-selling products including:
AG Secure Lifetime GUL
AG Select-a-Term
AG ROP Select-a-Term
Select-a-Term / ROP comparisons
"American General is committed to providing our valued distribution partners with the best-in-class mobile experience," said Erik Baden, senior vice president and chief marketing officer. "We offer innovative new tools to grow and manage business anytime, anywhere," he said. In addition to generating immediate, personalized quotes for life products, Rapid Rater on Mobile provides one-touch calling to the American General Life Companies National Sales Desk.
Downloading the free app is convenient on both Apple and Android platforms. iPhone users will launch iTunes and enter AGLC in the search field. Rapid Rater on Mobile will appear under the AGLC category, and producers can simply select and install the program. Android users will have a similar convenient experience with the free application in the Android Market.
Rapid Rater on Mobile application is the first in a series of content-rich, innovative mobile tools American General will provide for producers.
For more information about American General's new Rapid Rater on Mobile application, call the Marketing Software Helpdesk at (877) 800-2462 or the AGLC National Sales Desk at (800) 677-3311.
Writing More Business Means Solving for Financial Inertia
Today's consumers are very cautious about their spending- including spending on life insurance. Here are tips for breaking the stalemate and moving consumers to action.
by Anthony Vossenberg
Mr Vossberg is Senior Vice President, Life and Annuities, Genworth Financial. He can be reached at Anthony.vossenberg@genworth.com
The business of selling life insurance has never been easy. But today's environment may be the most challenging era ever for producers. In the second quarter of 2011, individual insurance premium and policy count rose just 1 percent over the same period in 2010. Meanwhile, new annualized premium for term life insurance dropped 5 percent (LIMRA, U.S. Individual Life Insurance Sales Summary Report, Second Quarter 2011).
American consumers are cautious and in some cases reluctant to spend and invest. They have been struck by what we might call 'financial inertia,' a startling inability to make decisions about their financial futures. And who can blame them? According to the September 2011 U.S. Census Bureau, real household income levels have dropped to their lowest point since 1996, making consumers reluctant to commit to new or increased coverage.
Unfortunately, many of them apparently fail to understand that insurance benefits may be usually the primary source of income for family members after a loved one passes away. According to a recent study, after a family member dies, many beneficiaries admit that they wish they had purchased additional coverage so that their family could sustain its standard of living, according to a recent study (2011 Genworth LifeJacketSM Study, 7 Key Insights to Help Close the Coverage Gap).
Of course, these unmet needs present producers a tremendous opportunity to help Americans secure what they value most in life. But how can producers help potential clients overcome their financial inertia? It's clear that agents need new approaches to talking to potential clients about life insurance.
Take, for example, this true anecdote. When Louis Kolchek* and his wife, Jessica*, a couple with two young children in suburban Connecticut, decided to purchase additional life insurance a few months ago, they say they were disappointed by the experience. Kolchek, 39, knew he and Jessica needed more coverage to protect their children if something were to happen to them.
They contacted an independent agent who, rather than learning about their goals and educating them about the different options and benefits available from various carriers, immediately tried to sell them a return of premium product. "There was no discussion of what we needed and what we could afford, I immediately felt like I was being sold on something," Kolchek says. "In fact, this particular agent spent much more time asking us if our parents would be interested in a long-term care product than guiding us through the process." Although the couple did buy two individual term policies, they admit that they will not work with this agent in the future as their needs evolve.
While the Kolcheks' experience may not be representative of how many agents sell life insurance, it's an example of the importance of returning to the basics, doing a proper needs analysis and not purely selling the merits of a particular product.
A new approach to needs analysis
Helping potential clients identify their needs is job one for today's producer. Unlike in past generations, today's consumer is concerned about recovering losses tied to declines in their household incomes, real estate values, 401(k) plans and investment accounts.
Fortunately, carriers are developing consumer friendly online insurance calculators. Our LifeJacket research shows that 88% of the people interviewed feel that an online calculator would be beneficial to them in the purchasing process. Carriers are also rolling out other tools that teach consumers how to have difficult conversations with family members. Some carriers have done a tremendous amount of research on how families can communicate about such topics as death, widowhood and caring for children left behind. Producers can and should take advantage of this research to help empower consumers to do their own needs-analysis homework.
The next step: fostering the relationship
Some carriers are also taking a deep dive into what is driving potential clients to purchase, or not purchase, life insurance from an independent agent. Honing in on this consumer behavior and responding to it is critical for producers. Here are four simple steps that producers can begin taking today to jump-start more productive relationships:
1. Talking the talk
One-third of today's policyholders purchased life insurance more than 10 years ago, according to a recent survey (2011 Genworth LifeJacket Study, 7 Key Insights to Help Close the Coverage Gap). Presumably, many of their insurance needs have changed significantly since then. The good news for agents is that consumers appear to welcome regular meetings about their needs. Nearly half (46%) of survey respondents show an openness to doing so on a yearly, semi-yearly or quarterly basis. Unfortunately, producers are not stepping up. More than one-quarter (26%) of consumers say they can't remember having evaluated coverage needs with their advisor. Producers can create significant business opportunities by simply sitting down with clients on a regular basis to talk about current policies and to make certain that coverage is sufficient for the present and future.
2. Know the audience
Agents need to know their target audiences and how they communicate. Our LifeJacket research shows that nearly two-thirds (66%) of those under age 36 show a penchant for web-based insurance calculators, but less than half desire detailed product comparisons. On the other hand, nearly two-thirds (66%) of consumers over 54 prefer detailed product comparisons, while only 51 percent want an online calculator.
Independent agents can improve business opportunities by focusing on the needs of particular subgroups. The chart below from the LifeJacket study shows the important variances in how consumers want to receive information. For example, only 17 percent of older Americans want to view insurance brochures, but 39 percent of younger consumers do. When dealing with diverse audiences, keep in mind that older consumers may react favorably to an advice-giving approach around benefits. Meanwhile, younger clients seem to want information delivered in a shorter, more straightforward manner that deals with costs.
3. More than one shining moment
Most agents realize that consumers are more apt to buy insurance in conjunction with an important life event. A recent LIMRA study (Trillion Dollar Baby Growing Up, 2011) shows that nearly half of consumers are more disposed to purchase coverage after an experience such as marriage, a child's birth, or a family death. But producers have to avoid thinking that these events represent one-off opportunities.
The study also shows a large gap between these 'trigger' occurrences and when consumers actually buy. The chart below reveals that consumers will delay 15 months after purchasing a home to buy life insurance. They will wait half a year after switching jobs or starting a new one. These intervals suggest that agents should take this time to have serious, strategic talks with clients. Instead of hurrying to sell them more coverage, savvy producers are using these milestones as touch points, and then working during the time gap to have discussions with clients about long-term needs and offer them high-value products.
4. A voyage, not a port
According to a recent study, Americans are waiting to acquire life insurance because they have other financial urgencies and they think they cannot afford it. The concept of financial inertia rears its ugly head: half of consumers who are likely to purchase coverage this year are waiting because they do not know what to buy, how much to buy or fear making the wrong choice (LIMRA, Trillion Dollar Baby Growing Up, 2011).
Agents should reassure consumers that acquiring enough coverage to secure all of their loved ones' financial needs may not be possible today. Instead, producers can tell clients that financial security is a journey, not a destination; some coverage is better than none. Agents should collaborate with clients to establish interim goals of purchasing enough coverage today to help guarantee that the family can take care of current financial needs. Then agents and clients can work to add coverage step by step as the family's requirements change.
Final thoughts
Many Main Street Americans (defined as adults with household incomes between $50,000-$250,000) face financial challenges today, right along with the life insurance industry. In the first half or 2011, total individual new annualized premium rose just 4 percent, and term life premium dropped 8 percent (LIMRA, U.S. Individual Life Insurance Sales). But there is a light on the horizon. At exactly the time when consumers are most confused about their financial futures, producers have the chance to help them secure what they value most. Half of U.S. households readily admit they don't have adequate life insurance coverage. (LIMRA, 2010 U.S. Ownership Study). It should be our mission to help concerned consumers create smart plans for their futures. After all, as challenging as today's times may be, don't we all want life to be better for the next generation?
*names have been changed to protect their privacy.
Boston's Retirement Income Industry Association
Partners with Texas Tech University
February 2012 seminar to offer intensive seminar program to prepare financial professionals
for advanced education in retirement income management
Boston, MA. - Texas Tech University, based in Lubbock, TX, is now the second university approved by the Retirement Income Industry Association RIIA) to teach the Retirement Management Analyst (RMA) curriculum in preparation for the RMA examination. Boston University Center for Professional Education, an RIIA university partner since May 2010, currently offers a distance learning program to potential candidates.
According to Francois Gadenne, RIIA's Chairman and Executive Director, the new Texas Tech Retirement Management Certification Seminar is a one-week, intensive program which will include lectures, lab assignments and final exam, and will take place in the new Charles Schwab Technology Complex on the Texas Tech campus. Students who successfully pass the final exam receive a certification from the university and are fully prepared to take the RMA exam to earn the RMA designation. "The RMA certification is the only one across the industry to focus specifically on providing retirement income planning and management centered around structuring a plan built on the solid foundation of first build a floor and then expose the portfolio to upside potential," Gadenne said.
Spearheaded by the faculty of the Texas Tech Personal Financial Planning Division (PFP), the seminar is taught by experienced instructors and faculty, as well as doctoral students who will assist with the applied lab sessions. Notable faculty and instructors include:
- Renown financial planning authority, Harold Evensky, CFP, AIF, RMA and president of Evensky & Katz, a nationally respected wealth management firm
- Dr. Michael S. Finke, Associate Professor and Director of the PFP PhD program and co-winner of RIIA's first Academic Thought Leadership Award
- Dr. John Salter, CFP, AIF, Assistant Professor in the Texas Tech PFP Division and Director of the bachelors' degree program
- Francois Gadenne, CFA, RMA, co-Founder, Chairman, and Executive Director of RIIA.
Dr. Michael Finke, Associate Professor and Director of the Personal Financial Planning PhD program at Texas Tech, believes strongly in the importance of retirement planning education and is interested in providing additional executive education opportunities for non-traditional students. "With our focus on financial planning, it was only natural to reach out to RIIA to find ways to expand the RMA program by offering a different learning environment and approach to potential candidates," said Finke.
The aim of the new seminar is to provide a thorough, science-based overview of retirement management that advisors, managers and executives from across the financial services, insurance, investment and retirement planning industries can use to more effectively serve consumers looking for professional advice and appropriate product recommendations to meet retirement income goals.
For more information on the RMA designation, go here.
The first seminar is scheduled for February 20-25, 2012, and the cost is $1,975, including hotel accommodations. Online registration is now open on the RIIA website’s section relating to the RMA program. To learn more, please contact Michael Finke at michael.finke@ttu.edu.
About the Retirement Income Industry Association
A not-for-profit organization with national and international members, the Retirement Income Industry Association (RIIA) was founded in 2006 by leading financial services companies, advisors and academics who wanted a focused approach to retirement income with a broad view across the financial services .
New Product Feature
W&S Financial Group Distributors
Introduces Newest Retirement Funding Alternative
MultiVantage maintains flexibility in uncertain interest rate climate
CINCINNATI - Dec. 12, 2011- W&S Financial Group Distributors, Inc., the wholesale distributor of annuities and life insurance from Western & Southern Financial Group (Western & Southern) member companies, announces the January 2012 launch of MultiVantage- a single premium deferred annuity with a market value adjustment (MVA).
Issued by Integrity Life Insurance Company (Integrity) in Cincinnati and by National Integrity Life Insurance Company (National Integrity) in Goshen, N.Y., both member companies of Western & Southern, the multiple advantages of MultiVantage include:
- Tax-deferred compound growth.
- Initial interest rates- all with 1 percent first-year enhancement- guaranteed for periods of up to 10 years.
- Flexibility to choose from several interest rate periods: an initial four-, five-, seven- or 10-year fixed interest guaranteed rate option (GRO) with the ability to choose a new GRO, as well as a one-year alternative, at the then-current interest rate when the initial GRO ends. (The 10-year GRO is not available for renewal in National Integrity states.)
- Minimum guaranteed rate for the life of the contract.
- Guaranteed lifetime income may be elected.
- If unexpected needs arise, up to 10% of the account value (noncumulative) may be withdrawn each contract year with no withdrawal charge or MVA.
- If the contract owner dies before income payments begin, the named beneficiary receives the current account value without probate.
"As buyers continue to navigate through this challenging interest rate environment, maintaining a degree of flexibility is imperative," said Mark E. Caner, MBA, AEP, ChFC, CLU, CFP, president of W&S Financial Group Distributors. "When an owner's initial guaranteed rate option ends, MultiVantage allows them to choose a second guaranteed rate option. Or they can forgo a long-term decision and simply default to a liquid one-year guarantee period. Then, anytime during that year, they can move to another guaranteed rate option once they judge where rates are trending."
Important. Please Note. In addition to an MVA, a withdrawal charge applies to amounts withdrawn over the free withdrawal amount. The charge decreases over time based on the number of years since the beginning of the GRO. The maximum charge is 8% in years 1 and 2 of Integrity contracts and 7% in year 1 of National Integrity contracts. Earnings and pre-tax payments are subject to income tax at withdrawal. Withdrawals prior to age 59½ generally are subject to a 10% IRS penalty tax.
About W&S Financial Group Distributors, Inc.
W&S Financial Group Distributors, Inc. (www.wsfinancialpartners.com) distributes fixed, variable and immediate annuities and life insurance products from Western-Southern Life Assurance Company, The Western and Southern Life Insurance Company, Integrity Life Insurance Company and National Integrity Life Insurance Company, all member companies of Western & Southern Financial Group. Variable products are distributed through Touchstone Securities, Inc.* Marketing through a national network of broker-dealers, financial advisors, independent agents and financial institutions, W&S Financial Group Distributors assists financial professionals in helping individuals invest for, live in and manage risk during retirement.
*A registered broker-dealer and member FINRA/SIPC.
2012 Financial Services/Retail Banking Industry Perspective
Industry may be transitioning from high-margin to low-margin
As we all know, growth is hard to find, revenue is under intense pressure, and the cost of doing business continues to increase. Four forces are shaping this reality: the economic climate, with high levels of unemployment, low interest rates, and a feeble housing market; consumers, who are borrowing less; regulators, who are both curbing fee-based income and increasing the cost of compliance; and technology, which is enabling nontraditional, low-priced competitors in areas such as payments.
Since the financial crisis, many in the industry have assumed or just hoped that these revenue challenges would be a cyclical phenomenon. But there is a creeping realization that this is not the case. It's our belief that a structural, secular shift is under way; the industry is transitioning from a high-margin business to a lower-margin one.
As significant as these secular shifts are for profitability, they are not the only forces reshaping the retail banking environment. Over the next five years, we expect that two megatrends will force retail financial institutions to rethink their operating models: digitization, which is de-integrating the front- to back-office value chain; and consumer expectations, which are relentlessly rising. Banks will need to invest in these technology advances-specifically, cloud computing, analytics, broadband, and social tools-to meet customer expectations, which are increasing as innovative nonbanks step into the space and solve common, long-standing customer "pain points."
To navigate this difficult environment and position themselves for future growth, leaders of retail financial institutions need to answer five critical questions:
How are we going to compete in this new customer demand-driven environment?
With limited avenues for growth, the banking sector will be hypercompetitive for the next three to four years. In this environment, it's critical for each bank to be very clear on how it will compete and win in the market. We believe that the winners will retain their profitable customers and capture a bigger share of their wallets. Adroitly targeting specific customer segments, creating products that go beyond deposit and checking accounts, and delivering those products through highly competitive (physical and virtual) sales forces will be competitive necessities.
As the banking value chain rapidly digitizes, banks will need to raise their game in technology and partnering to differentiate themselves. Specifically, banks need to significantly improve the user interface/customer experience by leveraging analytics in the front office and partnering with retail and technology firms to personalize offers, market to customers, and build loyalty.
What capabilities do we have to build?
Banks have traditionally focused on financial management, human capital management, risk management, operations, IT infrastructure, and acquisition and integration capabilities to differentiate and win in the market. The financial crisis and the current competitive environment are quickly making these capabilities table stakes. For a sustainable "right to win," banks must pursue differentiating capabilities.
Investing in certain capabilities will allow retail financial services companies to address four common customer pain points that have dogged the industry for years: Dealing with a bank is complicated and time-consuming; the customer receives impersonal treatment and little recognition; the customer is not in control or empowered to make decisions; and the customer gets no help engaging with friends and family on financial matters. By providing better solutions, banks can improve their ability to demonstrate value to consumers, which is essential for increasing pricing power and acceptance.
Four capabilities that banks can develop to address these pain points and outperform competitors are seamless multichannel experience (deliver an end-to-end customer experience); analytics-driven decision making (drive fact-based decision making and anticipate customer needs using deep insights from customer data); customer-focused value proposition (deliver highly tailored product and service offerings that include standardized and individualized solutions); and internal and external collaboration (work across organizational boundaries to deliver enhanced customer experience).
How fast can we and should we drive out costs?
Those who believe that the industry's current challenges are cyclical will drive out some costs while maintaining the same operating model. On the other hand, for those who believe, as we do, that a secular shift is under way, a more aggressive approach is necessary. Investing in the new capabilities will be expensive, and funding will need to come from wringing costs out of the operation. Banks will have to continuously focus on expense control-on how work gets done as well as what work to do-using lean and technology-enabled process redesign to build more flexible, responsive operating models.
In the process, banks should take advantage of emerging technologies to drive out complexity and improve the customer experience while also reducing costs-recognizing that these seemingly divergent objectives can now be simultaneously achieved. Structural adjustments to the operating model will be required to capture scale and bring variability to cost structures through consolidation and outsourcing. A more granular assessment of costly multichannel distribution networks will reveal where expense is not creating value. In addition, banks have to become nimbler and reduce bureaucracy in decision making by optimizing their organization structure through a reexamination of roles, spans of control, and management layers.
How can we get short-term revenue?
Given the challenging revenue climate, most banks are tempted to raise fees on customers to compensate for the shortfall. But imposing new or higher fees without extreme care is a recipe for trouble. First, and perhaps most obviously, higher fees risk alienating customers. The industry's attempt to raise debit card fees offers indisputable proof of this danger. The outcry was intense, from consumers and politicians.
The inclination to raise fees can also reveal a narrow, transactional view of the interaction that too often fails to take into account the value to consumers. Additionally, it overlooks existing and emerging ways banks can-and will need to-make money in coming years. Banks often provide skills and information to customers, particularly in commercial and small business sectors, as bundled add-ons or even as loss leaders. Yet some of these can be "unbundled" in a way that provides value to customers and more effectively monetizes the bank's existing capabilities.
For example, banks could aggregate information for the marketing and sales efforts of middle-market and small businesses; leverage deep financial and operational risk management expertise for middle-market and small businesses; offer white-label analytics for other financial institutions and business-to-consumer companies; or perform white-label outsourcing and transaction processing services.
Banks need to evaluate these ways to create new revenue streams by leveraging their existing information, expertise, and distribution capabilities and assets. Companies ranging from Amazon to American Express to GE to UPS have converted capabilities originally built to drive core businesses into new revenue sources. In these times, every bank should be doing the same.
How do we sustain the change?
Long-term success is achievable only if the changes adopted by the organization endure. Our experience shows that there are four pillars to sustainable transformation: senior direction and sponsorship, with a focus on augmenting capabilities in concert with cutting costs; ongoing performance management, including a shift in efficiency philosophy toward one that emphasizes continuous improvement; redesign of core processes via strategy planning and investment prioritization to address sustainability requirements and track progress; and leadership behavior to ensure that leaders set the right example and close skill and competency gaps.
Tackling these five critical questions won't be easy. But we believe that banks that make the effort will more clearly see how to cut costs and where to invest for growth, positioning themselves to outperform in the years ahead.
On the road with Econo-me
How Best To Advise Clients in a Volatile Economy?
Develop a plan and stick with it
By John E. Schlifske
Mr. Schlifske is chairman and CEO of The Northwestern Mutual Life Insurance Company, Milwaukee, WI.
In today's challenging economy, everyone is struggling to plan their financial futures- near and long-term.
Advisors are puzzling over traditional models for crafting financial plans and wondering whether those models are sufficient to assist their bewildered and, often, worried clients attain financial security. They wonder, among other challenges, what assumptions to make about future economic growth, the rate of inflation and the geopolitical dynamics that always shape our lives.
Is there a magic formula? That was a top question posed to economist and editor Steve Forbes and me by people we met on a recent Econo-Me: Redefining the Rules of Financial Security tour, with visits to six American cities in three days. We were addressing individuals and business owners about the economy and ways to navigate this tough economic terrain to maintain financial security.
These are the same issues confronting financial counselors- whether independent or representatives of insurers or investment companies- across the country. And, to be sure, they're asking their companies or financial-product suppliers if the changing times demand altering the long-term course for many of their clients. While I am no soothsayer, of course, I haven't hesitated in giving the same top-line counsel our financial representatives have been receiving from Northwestern Mutual leaders for years.
That is: Stay the course. Help your clients make financial decisions based on a plan that addresses their short and long-term needs, not on whims or fads. Don't forget proven principles, such as cutting spending, saving in addition to investing, and dollar-cost averaging for the long term. And remember that regardless of what the markets are doing, the stability of principal and compounding of interest are values to follow for all economic seasons.
Of course, short-term adjustments need to be made to financial plans over time, but any changes should not veer off course from the larger strategies you have established for your clients.
Take for example what we have done at Northwestern Mutual. Responding to the economy, we have made recent, shorter-term adjustments to our portfolio, which remain aligned with our long-term growth plans. A year ago, for instance, we made some slightly larger-than-average commitments to high-quality corporate bonds and high-dividend paying stocks. This approach worked well for us.
But that was not some sort of special bet. It was part of managing our well-diversified investment portfolio for the long term with assets spread among a variety of classes. For example, we recently looked at fixed income and equity returns over the past 20 years. We found that our portfolio's melding of the two provided higher returns than either category, and with less volatility.
Nothing helps to better lend credibility to our long-term view than examining those financial counselors who took shortcuts, flitting from one product scheme to another, all in the hope of capturing revenue from their clients and gaining new ones.
If there is an emotional connection financial advisors should try to convey to their clients, it's the feeling of security. And that feeling comes from maintaining financial strength, delivering long-term value and 'doing the right thing.' They also should be an advisor for all seasons, delivering steady dependability, not over promising and recommending products that perform regardless of the economic cycle.
Remember, in today's economy, financial security is no longer about just growing and managing assets. Rather, it means developing and sticking with a financial plan that knits together risk and investment products in a holistic planning culture based on lifetime relationships with clients. This involves managing risks as well as increasing and protecting assets over time.
Julie Prince, a wealth management advisor of our company based in Seattle, has been conveying this sentiment to clients for more than 20 years. Her dedication to her clients, calming nature, and ability to help others weather economic storms is a tremendous example of how all advisors should do business.
For years, Prince has advised client Carolyn Kelly. After establishing a financial plan for Kelly, Prince encouraged her to keep saving and stick with the strategy, regardless of the circumstances impacting the economy. She counseled Kelly to establish a long-term plan that contained a balanced mix of asset builders (e.g. securities) and risk management tools (e.g. life insurance), and little by little, through periods of market growth and recessions, Kelly stuck to the strategy that Prince established for her.
Today, at age 58, Kelly is retired, and credits Prince for helping her maintain financial discipline for more than 10 years. Can you imagine where Kelly would be today had she not stayed true to her long-term financial goals during periods of volatility?
Get Back to Basics
All of our research indicates that, because of the Great Recession and its anemic recovery, people have come to understand that they must save their way to prosperity. We are seeing a return to basic, sensible choices. Many Americans still struggle, but evidence exists that people have recalibrated their expectations and behaviors. They've widened their time horizons, become more risk-sensitive and now pursue their own financial security on a more realistic path.
A recent study by my company found that 72 percent of respondents set goals in their financial life, and almost one-third of respondents look to accomplish their financial goals over the long-term, specifically, 10 years or more. This speaks to consumers' understanding of the need to protect against the financial risks they face. And, frankly, it dovetails exactly with the thinking of our financial representatives. This is helpful for their clients because it takes discipline over the long term to get people to develop a plan and stick with it.
It will take time, of course, for the economy to get back to a more stable state. And that will be the case regardless of the outcomes of the 2012 elections. It's historical fact that periods of over-leveraging take years to unwind, and Americans should prepare for a long period of retrenchment. Financial advisors and representatives can help their clients weather this persistent period of economic uncertainty. If they've made financial decisions for their clients based on their short- and long-term needs, they can remind them to listen to just three words: Stay the course.
Small (but Mighty) Business Owners Are a Tough 'Get' for Financial Advisors
But once that first meeting is scheduled, the advisor must demonstrate expertise in running a small business
ST. PAUL, Minn. - For many financial advisors small business owners (SBOs) are highly desirable when building an advisory business because of the many financial services they need and use. But SBOs are legendarily difficult to get in front of because they are so busy and not particularly interested in hearing about a service they're not convinced they need.
"Our research shows small business owners have many financial concerns, but only half work with financial advisors," said Kerry Geurkink, director, Annuity Marketing, Securian Financial Group, Inc. "And even then they work with advisors more on personal finance than business-related issues."
"Small but mighty: Growing opportunities for financial advisors and small business owners" is a summary of Securian's deep dive into the financial concerns small business owners consider paramount. The online, statistically valid survey of 435 SBOs across the US shows their top financial concerns include cost control, profitability, building wealth, financial security for their families and rising health care costs.
Ironically, the percentages of SBOs who want outside assistance with these concerns is much larger than the percentage who actually seek and use it. There are circumstances under which SBOs consider seeking a financial advisor's services. All fall in the typical advisor's 'sweet spot,' including business succession planning, personal finance, asset management and employee benefits. How does an advisor get on a small business owner's radar? Recommendations from family members, business acquaintances, and other financial professionals provide the best entree to an SBO. Clearly, networking with bankers, accountants and attorneys is important.
"But once that first meeting is scheduled, the advisor must demonstrate expertise in running a small business," say Geurkink. "That part should come easily since financial advisors themselves are small business owners."
"Above all," she adds, "advisors must prove that assistance from a financial consultant is an investment rather than an expense. Our job is to provide our producers with the tools they need to make that case."
Geurkink says Securian will use the research to develop a 'Small But Mighty' campaign that gives advisors a step-by-step approach to building their small business clientele.
Small business owners surveyed met these requirements
- Private company ownership, sole or shared
- At least 50 percent responsibility company financial decisions
- At least 50 percent responsibility for household financial decisions
- For-profit company not in marketing, market research or financial planning
- Three to 250 employees
- Minimum of one year as owner.
Quotas ensure representation by company size and owner gender. Data are weighted to reflect the proportion of business size and female ownership (33%) in the United States per 2007 census data.
Downloadable charts and graphs available upon request. A summary report can be found here.
Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation's largest financial services providers, it is the holding company parent of a group of companies that offer a broad range of financial services.
Top Trends for Small Business Owners in 2012
Likely to Encounter Continued Volatility, Tight Lending Practices;
Competition from Larger Companies, Negativity Spurred by Election, Trade-offs and Deal-making
NEW YORK - The Guardian Life Small Business Research Institute has identified six trends small business owners are likely to face in 2012. Many of these trends are extrapolated from the Institute's research fielded in October 2011, which surveyed nearly 1,100 business owners of various sizes. They indicate that small business owners will need to focus on improving productivity and differentiating their businesses to overcome continued economic challenges and to compete with larger companies in the coming year.
"The ongoing uncertainty of the economy, increased competition and the impression of negativity surrounding election-campaign rhetoric will greatly affect small businesses in 2012," said John Krubski, research advisor to The Institute. "Anticipation of these issues, coupled with guidance on how to tackle them, will help small business owners maintain and potentially grow their business in the New Year."
In addition to identifying critical issues for small business owners in 2012, The Institute outlined six specific actions owners can take to prepare for likely challenges in the coming year:
Continued economic volatility in 2012
The Institute's research found that a significant portion of small business owners, 44 percent, believe that the economy is the 'one thing that stands between where you are today and growing your company.'
Action: Develop and deploy integrated action plans. A dynamic and flexible short-term plan makes it possible for a business to deal with immediate challenges. However, a short-term plan is most likely to succeed if it is part of a comprehensive, proactive long-term planning process.
Access to capital will continue to be tight, and lending practices even tighter
2012 is likely to see a drop in business spending and continuing sluggish GDP growth. Neither of these factors bodes well for loosening the supply of capital flowing to small businesses.
Action: Consider where borrowed money can do the most for your business. In considering the cost of debt, business owners responding in the Institute's research offered the following priorities relative to borrowing money to fund their operations: upgrading equipment (91.2 percent); short-term cash flow (81.3 percent); investing in marketing (78 percent); and adding people (60.7 percent).
Significant numbers of marginally successful businesses will be pushed to the brink
According to Institute data, 14 percent (or one in seven) of small business owners surveyed said they would probably close down their companies were revenues to drop drastically over the next 12 to 24 months. For sole proprietors, that figure increased to 23.3 percent.
Action: Improve productivity. A difficult economy presents an opportunity to right-size a company for long-term success. Small business owners should ensure they have the right people in the right positions so they can focus on growing the business, especially at a time when competitors' market share may be vulnerable.
Larger companies will aggressively market to prospects considered 'too small' in the past
Larger companies with which small businesses compete will be more likely to 'poach' customers they have traditionally considered to be outside of their target market segment.
Action: Look for ways to meaningfully differentiate. Small business owners should seek ways to demonstrate how their company is more responsive to customers or able to provide more customized, localized or cost-efficient service. They can also consider partnering with complementary businesses to offer a broader range of resources to customers that traditionally prefer dealing with larger companies.
Election-year campaign rhetoric will create an atmosphere of tension and negativity
Small business owners should expect that presidential candidates and members of the media will devote a great deal of time and attention to how 'bad' things are, or how 'bad things might be.' This negativity can further dishearten the customers, salespeople and workforce of small businesses, not to mention small business owners themselves.
Action: Be optimistic! If small business owners exude a sense of confidence, optimism and focus, their customers and employees will feel it and respond accordingly. More than in most years, attitude in 2012 will be extremely important to success. Further, when it comes to future legislation, small business owners should not get distracted, but rather stay on their path.
Trade-offs and deal-making will characterize 2012
Vendors and service providers will be more willing than ever to trade a degree of their profitability for the certainty of doing business.
Action: Cut deals that create certainty for vendors, customers and the business. Small business owners should sit down with vendors and larger customers and offer to make commitments in return for price reductions or better payment terms. This includes meeting with staff, advisors (accountant, attorney, financial planner) and key customers to do a 'start from scratch' review of everything that costs, and makes, the company money.
"With many large companies downsizing, small business owners have a unique opportunity to be creative in the way they attract talent from organizations by offering competitive benefit structures," said Ernie Guerriero, head of qualified plan marketing for the Business Resource Center for Advanced Markets at Guardian.
"Small business owners have to be highly motivated and learn to be creative and resilient to succeed in difficult economic times," said Patricia G. Greene, Ph.D., MBA, special academic advisor to The Institute and the Paul T. Babson Chair in Entrepreneurial Studies at Babson College. "The trends and actions identified by The Institute can serve as a great toolkit to help them be even more enterprising in 2012."
About The Guardian Life Small Business Research Institute
The Guardian Life Small Business Research Institute is a resource devoted to better understanding America's small business owners. It combines research the company commissions with the expertise of people within the Guardian Life family who have deep experience in the small business community, to yield deeper knowledge, insights and wisdom about today's small business trends. In 2011, The Institute was named one of North America's top small business influencers in the Small Business Influencer Awards for making a meaningful and lasting impact on the small business market.
For more information about The Guardian Life Small Business Research Institute, please visit: www.smallbizdom.com.
New Product Focus
MetLife's new International Business Travel medical coverage provides
additional peace of mind to employees on assignment
Emergency and urgent medical care from any licensed doctor or hospital when outside of their home country
NEW YORK, - Coping with a medical emergency while on international business travel can be daunting for even a seasoned traveler, particularly if there are language barriers. To help alleviate this worry and so that companies and their employees can better concentrate on their business, MetLife, a leading provider of global benefit solutions, today announced the availability of International Business Travel Medical (IBTM) coverage. IBTM provides assistance and coverage for emergency and urgent medical care for employees traveling on short-term assignments outside their country of residence.
"Adjusting to different cultures, languages and currencies can be challenging enough during routine international business travel without the added concern of trying to find medical assistance in an emergency. MetLife's new International Business Travel Medical coverage and resources can help when navigating the global healthcare market and provide additional peace of mind to employers, employees and their families," said Michael J. Malouf, senior vice president, Global Strategies and Sales for MetLife's U.S. Business.
MetLife's IBTM coverage allows business travelers to seek emergency and urgent medical care from any licensed doctor or hospital when outside of their home country. Coverage includes physician and medical facility care as well as related prescription drugs. Using a dedicated telephone number, business travelers can, around-the-clock, receive pre-screened doctor and hospital referrals and learn which providers are part of a direct settlement network so that out-of-pocket spending is reduced or eliminated.
The 24/7 assistance also includes translation services, emergency medical evacuations, family bedside visitations, emergency cash transfers and embassy or consulate referrals. There are no exclusions for pre-existing conditions. Additional optional features include:
- Accidental Death and Dismemberment (AD&D) coverage;
- Dependent medical coverage for spouses or children also traveling on the trip; and
- Coverage during leisure travel associated with the short-term business assignment.
Global Access, Simplified Administration
"Arrangements for international business travel can be complicated enough for both employees and employers so this product has been designed to be simple to use and administer," said Al Vilar, senior vice president, International Corporate Business Development at MetLife. "One phone number for employees to call, no matter where they are, no matter the time and no matter the language, helps to ensure medical assistance is found quickly."
IBTM offers multiple plan design options so that companies can customize a benefit program based on their budgets and the needs of their employees. IBTM is the latest offering among MetLife's suite of expatriate benefits. MetLife has been a provider of expatriate programs for more than 35 years, offering products such as medical, dental, life, AD&D, disability and vision. Expatriate Benefits products are underwritten by Delaware American Life Insurance Company (DelAmLife), a subsidiary of MetLife, Inc. and are not available in all states.
To learn more about MetLife Expatriate Benefits, visit www.metlifeexpat.com.
Research Shows 9 Million Americans, Ages 44 to 70,
Now in Encore Careers Combining Purpose, Passion and a Paycheck
Despite Concerns About the Economy, 31 Million More Interested in Joining Them
SAN FRANCISCO--(BUSINESS WIRE)--New research from Civic Ventures, a think tank on boomers, work and social purpose, shows that as many as 9 million people ages 44 to 70 are already in encore careers that combine personal meaning, continued income and social impact. That's up from an estimated 8.4 million in 2008.
"The tens of millions who are interested in encore careers want some level of financial security and the opportunity to work for the greater good"
Another 31 million people, ages 44 to 70, are interested in finding encore careers. Together, those currently in encore careers and those interested in encore careers represent 40 percent, or two in five, of all Americans ages 44 to 70. "The survey provides new evidence that what many people want from work changes after midlife," said Marc Freedman, founder and CEO of Civic Ventures and author of The Big Shift: Navigating the New Stage Beyond Midlife. "In the new, encore stage of life between midlife and true old age, many want work that has deeper personal meaning and that connects them to something larger than themselves."
The new study, Encore Career Choices: Purpose, Passion and a Paycheck in a Tough Economy, was funded by MetLife Foundation and conducted by Penn Schoen Berland. Survey results do show tempered expectations in light of the current economy, as well as a kind of resilience and an unwillingness to give up on efforts to create a better world for future generations.
A few key statistics:
- Competing visions. Nearly two in three people (64 percent) see the next stage of life as a time to keep working, with nearly equal numbers saying it's a time to use their skills and experiences to help others in paid or volunteer positions (31 percent) versus a time to simply cover expenses and maintain health insurance (33 percent).
- Tough time for a change. Half of Americans between the ages of 44 and 70 (51 percent) say they are very concerned that the state of the economy makes this a difficult time to make a change to an encore career. Still, one in four (27 percent) of those interested in encore careers say they are very likely to make the switch in the next five years.
- Longer working lives. The online portion of the research suggests the impact of encore careers on longer working lives could be dramatic. Those currently in encore careers expect to work to 69.1 years on average and those interested in encore careers expect to work nearly as long, to 68.6 for both groups, 3.5 years longer than they thought three years ago.
- Concern about future generations. Contrary to stereotypes about boomers, concern about future generations is high. Nearly three in four respondents (73 percent) expect that children in the U.S. will grow up to be worse off than people are now. Nearly as many (70 percent) say it is very important to them personally to leave the world a better place.
- Intensity of interest. One in four of all respondents (25 percent) rate their interest in encore careers at eight or higher on a 10-point scale in 2011, down from one in three (34 percent) in the 2008 Encore Career Survey, also released by MetLife Foundation and Civic Ventures. Yet a majority of those who remain very interested (62 percent) state that their interest has grown in the past three years.
- A choice for all income groups. There is little difference in economic circumstances between those who are interested in encore careers and those who are not. Both groups have median incomes of $45,000 to $59,999 per year. About half of both groups report household assets of less than $150,000, and roughly one-third in both groups say their assets do not exceed $50,000.
- Hours in encores. Those in encore careers now perform an estimated 16.7 billion hours of labor each year in education, health care, government and nonprofit organizations.
"We are beginning to see the years beyond midlife, the encore stage of life ,as a time for new, purposeful work that would improve the quality of life for people of all ages and in communities across the country," said Dennis White, President and CEO of MetLife Foundation.
"The tens of millions who are interested in encore careers want some level of financial security and the opportunity to work for the greater good," said Freedman. "As a society, we need to do more to help them achieve both goals. When we do, we will tap into a huge new source of talent to help solve our greatest social problems."
Last week, Intel announced it would do its part to help thousands of its retirees prepare for encore careers. The company said it will offer all U.S. employees who are eligible to retire the chance to apply for Encore Fellowships – paid, part-time, yearlong assignments working at local nonprofits. (For more information, go to www.encore.org/fellowships.)
For the full Encore Careers Choices research report, go here.
The Hartford Invents Faster Way To Deliver Life Insurance
Issue First now delivers permanent life insurance policies in five days or less
Simsbury, Conn., Nov. 7, 2011 - The Hartford will deliver permanent life insurance to consumers in just five days, slashing the industry average of 48 days, through its new Issue First process. The patent-pending approach resolves a common consumer complaint that 'it takes way too long to buy life insurance.'
"Today's consumers are used to buying products online and receiving them at home within 48 hours," said Brian Murphy, who heads The Hartford's life insurance business. "We see no reason why they should have to wait more than a month to receive a new life insurance policy. By creating a new way of assessing a person's risk factors and reordering the underwriting process, we can now provide consumers with life insurance coverage in a fraction of the time it used to take."
Consumers are responding favorably to the faster service. In a pilot conducted earlier this year, over 90 percent of people who applied for a Hartford policy using Issue First bought the policy. That compares with just 68 percent of consumers who purchased a policy using the traditional selling approach. Through Issue First, the company issues the policy to consumers before it completes the normal underwriting process. Issue First reverses the order of the process by asking the consumer eight critical questions up front. If they can honestly affirm all eight questions, they receive coverage on the spot that cannot be revoked because of an unforeseen medical condition. Only then does the full underwriting process begin.
Ivan Measroch, an independent advisor in Atlanta, Georgia, says Issue First is likely to appeal to advisors, too. "It will save time that was previously spent updating clients on the status of their application and will allow commissions to be paid up front as well," he said.
Issue First is one of many life insurance innovations recently introduced by The Hartford. The company received a patent this year on the system that manages its LifeAccess Accelerated Benefit Rider, which can be added for an additional cost to its policies to provide income to those who become chronically ill. The company also has patents pending on Issue First and a dozen other products, including its LongevityAccess Rider, which is the first rider to provide income to policyholders who live to the age of ninety and meet the terms of the riders. Both riders can be applied for using the new process.
"The delay people encounter when they attempt to purchase life insurance discourages them from sticking with the process," Murphy said. "The result is that many people give up and simply don't get the coverage they need. Issue First solves this problem by taking the hassle out of the purchasing process."
Applicants are given a premium estimate at the first meeting with their advisor and receive the final premium quote after underwriting is completed. In more than 95 percent of the policies completed during the pilot, the final premium was the same or less than the estimate.
The company has also introduced an electronic, paperless application capability that includes the option of using electronic signatures.
New York Life/NAGC Survey
Bereaved Parents Face Big Challenges in Helping Kids Cope with Loss
New York Life Foundation offers achildingrief.com to help guide parents, kids through loss
Survey of Surviving Parents Finds
- Three-quarters of parents say not enough resources to help grieving kids
- 43% worry daily about how their children are coping
- Nearly 6 of 10 say “hard to know what my child needs from me”
- For the Bereaved, Household/Financial Management Becomes Daunting:
- Three-quarters need help with household maintenance
-Half “not prepared” for financial impact of loss
- Six of 10 find it harder to maintain lifestyle, invest, save for kids’ higher education
- Friends/Community Can Make All the Difference:
- A key “grief resource”: Societal understanding/support
- Yet, many parents say friends, co-workers reluctant to discuss loss
- Three-quarters of parents say support of friends/family has “major impact” on ability of grieving kids to cope
NEW YORK - (BUSINESS WIRE) - Parents who have had a spouse or partner die find it challenging to know how best to support their grieving children, a challenge complicated by a lack of community awareness about bereavement as well as resources that respond to the needs of those in grief, according to the results of a nationwide survey of bereaved spouses/partners released here today by the New York Life Foundation and the National Alliance for Grieving Children (NAGC).
“With school officials literally on the ‘front lines’ of the grief phenomenon outside the home, we need to ensure that schools and teachers, in particular, are better prepared to support grieving students.”
Grief’s impact is both lasting and profound, the survey indicates. Nine of 10 parents say the death of their spouse/partner is “the worst thing that has ever happened” to them. Nearly eight of 10 say they think about their deceased spouse/partner every day and 70% indicate they would “give up a year of my life for one more day with my departed spouse.”
At the same time that they are striving to cope with their own grief, bereaved spouses/partners also are beset by worry about their children, with nearly half reporting their kids are having more trouble in school and nearly six of 10 indicating “I find it hard to know what my child needs from me.”
The poll of 548 parents who lost a spouse/partner and who still had children under the age of 19 living at home was conducted nationwide via the Internet between July 6 and October 5, 2011, by the national polling firm Mathew Greenwald & Associates, Inc. The research was conducted under the auspices of the National Alliance for Grieving Children, the nation’s leading organization of bereavement centers, and was underwritten by a grant from the New York Life Foundation.
“Bereavement is a universal experience - a burden that inevitably each of us will shoulder at some point in our lives," said Chris Park, president of the New York Life Foundation. "The irony is that as a society and as individuals, all too often we shy away from confronting the grief phenomenon, and therefore neglect the urgent need to help those struggling with loss - in particular, children who have suffered the devastating loss of a parent."
Death of Parent in Childhood a Widespread Phenomenon
More families may be struggling with loss than may be commonly thought. In late 2009, a survey of 1,006 adults conducted by New York Life with Comfort Zone Camp, a leading provider of bereavement support services for children, found that one of nine Americans had lost a parent before age 20; one in seven had lost a parent or sibling before turning 20.
"We believe that it is time to shine a brighter light on grief, to better understand its impact on both kids and parents, and to resolve to do more to help families along their grief journey," Park said.
"We're grateful for the tremendous support that New York Life is providing for this urgent cause," said Andy McNiel, executive director of the National Alliance for Grieving Children. "Our polling has confirmed what many professionals providing grief support to families understood to be true about grief and has generated new insights into how bereaved parents strive to ease the grief of their kids - and what we can all do, individually and collectively, to make a difference in our communities, workplaces and families for those grieving the death of a family member."
For Parents, Concern for Kids Intensifies Grief's Burden
For bereaved spouses/partners, bereavement's burden is exacerbated by unrelenting worry regarding how their kids are dealing with life following their loss, the survey indicates. Nearly half say they worry daily about how their children are coping with the death of their parent. Many parents concede that they don't truly understand what their children are going through in managing their grief: more than three-quarters of parents say it's 'hard to know what is normal kid behavior vs. what is grief related.'
"Though grief is a shared phenomenon, children don't necessarily grieve in the same way as their parents do, and parents clearly feel challenged to understand precisely how loss is affecting their children," said David J. Schonfeld, MD, Director of the National Center for School Crisis and Bereavement at Cincinnati Children's Hospital Medical Center. At the same time, parents are concerned about the worry that their kids are themselves experiencing. About two-thirds say their kids worry at least sometimes about their surviving parent going through life alone, and nearly four in 10 think their child worries frequently about them getting sick or dying.
"When a death directly affects children, death’s reality cannot be hidden from them," said Dr. Schonfeld. "Sometimes children are overwhelmed with worry that others close to the - perhaps everyone they care about - will also die.
"The findings speak to the critical need to better understand the nature of grief experienced by children - and should compel us to work harder to meet each child's specific needs as best we can," he said.
Advisors Take Note:
Families Challenged to Maintain Financial Security
The death of a spouse/partner creates burdens on many levels, and at the same time that bereaved spouses/partners are struggling to manage the emotional burdens of the death, many are also having difficulty dealing with many of the formerly straightforward details of domestic life.
Three-quarters say they have needed help with household maintenance. A little more than half (54%) report needing assistance with financial management.
Financial management, in fact, is one of the more complex issues associated with loss of a parent. Half of parents say they were not prepared for the financial impact of their spouse's death. Two-thirds say it has been harder to put money away, and about six in 10 say it has been harder to invest, save for their child's college education, and earn enough money to maintain their lifestyle. Nearly six of 10 agree that it has been harder to 'find some money to spend on yourself.'
"For bereaved parents and kids, money issues can generate a cascade of worries," said Meredith Moore, a New York Life agent from Roswell, Ga. "Kids, for example, might worry about their surviving parent's ability to keep the family together in their home, or the possibility of having to move and attend a new, unfamiliar school."
"Perhaps no one can ever fully prepare for the impact of loss, but there is much that parents can do to create safeguards against the financial disruption that often follows when the unthinkable occurs," said Larry Bennett, a New York Life agent based in Brea, Calif. "Professional financial guidance can be invaluable in putting these safeguards in place."
-more-
Approaching 2012
Ready. Fire. Aim.
Four themes to guide you into the new business year
by George F. Brown, Jr.
Mr. Brown is the CEO and co-founder of Blue Canyon Partners, Inc., a strategy consulting firm working with leading business suppliers on growth strategy. He is a author of CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs. Visit www.bluecanyonpartners.com
As businesses look toward 2012, many are developing ambitious plans in order to achieve their growth and profit goals. In conversations with many organizations, I hear of four themes that are included in many of these plans.
First, while globalization has been going on for quite a few years, many firms are planning to elevate activity levels a few notches. They know that most of the growth in their markets will take place in countries like China and India. They also recognize that new competition from abroad is emerging in their traditional home markets. Responding to both the opportunity and the challenge is a 2012 priority across industry after industry.
Second, many initiatives are designed to enable firms to evolve from 'selling a product' to 'becoming a solutions provider'. Such initiatives will be oriented toward stopping the commoditization that has been occurring in many of their product lines, with its adverse implications on prices and margins. Initiatives in this category often involve new service offerings and require a much closer set of relationships with customers.
Third, responding in part to the strong balance sheet many firms have developed since the 2008-09 recession, many firms are actively pursuing interesting opportunities for acquisitions and investments. The acquisition concepts will be ones that will create headroom for growth by expanding into adjacent product and market spaces. Many internal investments will be based upon opportunities associated with new technologies such as the cloud and social networking and others will respond to current-day challenges such as security of the supply chain and information vulnerability.
The fourth theme that is being elevated in the 2012 plans of many organizations is that of sustainability. This topic has been around for some time, but changes are taking place. Sustainability is now viewed as an economic concept. If you can use less resources or shift to less expensive resources, you can improve your bottom line. This gets the attention of the P&L managers within the firm.
All of these initiatives are responsive to the business environment of 2012. And all of them will pose major challenges for the firms that will be implementing them. In quite fundamental ways, initiatives within these categories will require changes to core elements of the business models of the firms that include them in their 2012 plans.
In my research on implementing changes to a firm's business model, I've seen over and over that successful firms think about their external relationships as part of their Get-to-Market Plans.These best practice firms emphasize the importance of getting input from customers about changes that are contemplated.But the source of valuable insight doesn't stop with customers. For many businesses, supplier ingredients account for a significant portion of their product's value.And sales channel partners - dealers, distributors, wholesalers, integrators, contractors, and others - often provide key services that are critical to end customer satisfaction with these same products.
Anyone who is an avid reader of the business literature would conclude that the points in the above paragraph are now so obvious that the appropriate response of a reader should be 'Duh!' But, sadly, obvious doesn't yet seem to translate into action in far too many instances. While not connected to the 2012 initiatives described above, I recently heard the following story from an executive in a firm that specializes in high-technology instruments:
"Our plan was to lower our overall cost by outsourcing design and manufacturing to suppliers in various low cost countries. The potential for cost savings was real, but our plan had unintended consequences. In retrospect, we did not understand the value proposition that had previously allowed us to succeed with our customers. In the past, by manufacturing and designing the product ourselves, we insured the design and quality of the products met our customers' requirements."
After this firm implemented the change to their business model, substitutions and design changes were made by the companies to which they had outsourced responsibilities for this product line. Many of these changes were immediately visible to the firm's customers. And, as a result, their customers soon concluded that this company no longer provided the value that they had considered important. Some customers even recognized that they could easily purchase a similar product directly from the same off-shore suppliers, with minimal resources or risk on their part.
The lesson cited by the executive who provided this case study was simple. In his words:
"We learned that business model changes always impact in many ways. A too-narrow focus, in this case on the costs of design and manufacturing, can yield adverse outcomes when the other impacts begin to surface. The team that in this case saw the potential for cost savings on this product line failed to understand what had been valued by the customers who bought it. A significant level of business was lost as a result. The summary is simple: we failed to reach out to our customers and hear their inputs before we implemented this plan."
His story is all too frequent. In another case study, an executive provided a post-mortem to a failed initiative with the following comment:
"Getting our customers and key business partners on board was obvious in retrospect. But we never included doing so in the implementation plan, and our implementation project took six months longer than we had expected, as we had to bring them on board on an 'afterthought' basis."
Experience after experience suggests that there are few times when a change in strategy or in a firm's business model doesn't ripple through to impact on customers and key third-party business partners.
Involving customers and key business partners is not just about avoiding clashes, although there can be clashes anytime a firm pulls a surprise on its key customers, suppliers, and sales channel partners. It involves ensuring that processes link correctly when they have to do so.It involves making sure that each party to a business relationship understands their own roles and responsibilities. It involves making sure the two firms are interacting often enough and at the right places to get ahead of problems and opportunities. It involves making sure that discussions are focused on the future, not looking in the rear view mirror.
Mike DeLano, Executive Vice President of Mitsubishi Electric Automotive America, said that when implementation success requires collaboration from third-party organizations (customers, suppliers, channel partners), the best approach is "to bring them clearly defined changes that are sure to work." But even then, he says that if you are going to ask them to spend more or redirect resources or change their processes, you have to have a compelling benefits statement and be ready to sell, sell, sell. Doing so requires a careful examination of the strategy and implementation plan from the vantage of your business partner's perspective. Will the steps you are asking your customers or supplier or sales channel partner to take make sense in terms of their own business model and bottom line? If not, expect an uphill battle.
There is one other dimension to this lesson on involvement of key third-party organizations: Involve them in implementation planning, not just in the implementation plans. Over and over, we've seen examples when customers or suppliers or sales channel partners spot an issue in the implementation plan or suggest a shortcut that can save time and money. Many times, the vantage point of these business partners provides a perspective that isn't obvious to those in your own firm. Take advantage of their experience and insights. After all, they share a stake in the success of your plans.
One of the things we've learned is that strong leaders of implementation projects carefully think about the impacts of their plans on their firm's customers and business partners. Then they bring them into the process and make sure both parties are aligned. The insights that can come from such conversations can ensure that your plans are well-aimed before you decide to fire.
Small Business Owners Confident About Next Two Years,
Despite Major Short-Term Difficulties
Burdensome federal regulations and hiring qualified employees pose significant challenges;
State of business will influence small business owner voting in 2012
HARTFORD, Conn. - According to The Hartford's Small Business Success Study released today, small business owners are battling regulatory challenges and the war for talent, factors that are negatively impacting their bottom line and potentially altering how they vote in 2012. Despite high unemployment rates, finding qualified talent is a challenge for 59 percent of small business owners. At the same time, two-thirds (68 percent) say that their business is a consideration when voting, particularly if certain policies directly impact their business. The majority (70 percent) of small business owners feel successful, even as they face challenging conditions.
The Hartford's Small Business Success Study surveyed 2,000 small business owners nationwide to gain a better understanding of the issues and factors impacting their success and outlook.
"We developed this comprehensive study of the nation's small businesses to learn how well equipped they are to maximize their future success," said Liam E. McGee, Chairman, President, and Chief Executive Officer of The Hartford. "Small businesses are the U.S. economy's primary job creators, and a powerful force - not just economically but also behaviorally. They carry on the tradition of the driven, confident, creative people who built America. From the study we learned that most of them expect to be successful in the next two years, even as they face challenging conditions. Our hope is that the U.S. will foster an environment that is more hospitable to small businesses. Our country should be celebrating and liberating entrepreneurs, not burdening them."
Different Ways to Define Success: Passion Before Profit
Small business owners remain optimistic about their success - even in a tough economy - because profits aren't always the definition of success. In fact, 82 percent say they place great importance on doing something they feel passionate about and enjoy. Although 77 percent acknowledge that increasing profitability of the business year over year is very important, only 18 percent say this is the most important factor in defining success.
Other notable findings
- Most small business owners want to stay deeply involved in the operation of their business (81 percent).
- Achieving a comfortable lifestyle for themselves (79 percent) and their employees (72 percent) is important.
- An overwhelming majority indicate they enjoy owning their business (90 percent).
- The study's findings also shed light on the widely-held belief that all small business owners seek to expand and maximize profitability. In fact, it found that growth is not a shared goal among all small business owners. While 52 percent do consider themselves to be growth-oriented, 48 percent describe themselves as maintenance-oriented and are comfortable running their business at its current size.
Maintaining a Positive Outlook
In spite of the current economic environment, many small business owners remain optimistic about their prospects for success in the short-term, with 51 percent projecting that they will be very successful in the next two years. Only 6 percent are predicting they will fail to achieve success in that time frame. Confidence in their ability to stay in business is a major factor leading many small business owners to feel as though they are currently successful.
Additional Barriers to Success
It is clear that the national economy continues to put pressure on a majority of small business owners, with 57 percent indicating it has had an impact. When asked what keeps their business from being successful, small business owners note that financing their business is a particular area of pain. Specifically, 34 percent of respondents say that obtaining a loan or other capital is difficult.
Small businesses are also challenged by government regulations, which result in greater administrative and accounting burdens. According to the study, small business owners identify economic constraints, such as government rules, regulations and taxes, as the single biggest factor holding them back (37 percent). And, they say that uncertainty about how public policy could potentially stunt the future growth of business is hindering their ability to plan ahead. Other barriers include rising energy and fuel prices, and a lack of customers.
Few Focus on Long-Term Planning
It's not uncommon for many small business owners to overlook long-term planning goals while focusing on short-term business needs. The study's findings validated this common oversight, with only 35 percent of small business owners saying they have a formal, written business plan for the future.
For more information on The Hartford Small Business Success Study, go here.
The Hartford Small Business Success Study Methodology
The Small Business Success Study was developed by The Hartford with Fahlgren Mortine and fielded via telephone and Web by Abt SRBI from July 23 - September 21, 2011. The nationally representative sample consisted of 2,000 small business owners of companies with fewer than 100 employees and annual revenue of $100,000 or more that have been in business for at least one year. At least 200 small business owners were oversampled in New York, Southern California, Chicago and Dallas. The margin of error is +/-3.03 percent for the national sample, +/-7.53 percent for New York, +/-7.72 for S. California, +/-7.12 for Chicago and +/-7.91 for Dallas, with a 95 percent confidence level for all.
About The Hartford
The Hartford Financial Services Group Inc. (NYSE: HIG) is a leading provider of insurance and wealth management services for millions of consumers and businesses worldwide. The Hartford is consistently recognized for its superior service and as one of the world's most ethical companies. More information on the company and its financial performance is available at www.thehartford.com. Join us on Facebook at www.facebook.com/TheHartford. Follow us on Twitter at www.twitter.com/TheHartford.
Keeping clients happy
For Voluntary Benefits, it's all about employee satisfaction...
...and not so much cost-cutting
NEWARK, N.J. - Although many companies continue to tighten their financial belts, when it comes to voluntary benefits, employers are much more employee focused, as opposed to cost driven. The Gauging the Success of Voluntary Benefits, the second in a series of research briefs stemming from Prudential's Sixth Annual Study of Employee Benefits: Today & Beyond, found that 75% of employers say their top reason for offering voluntary benefits is to expand the benefits options available to their employees, with 42% offering voluntary benefits to fulfill an employee need, and 30% offering them at their employees' request.
Voluntary benefits are optional programs that are made available at the workplace and 100% paid for by employees. 85% of employers say they offer one or more voluntary benefits including life insurance (63%), disability insurance (56%), and dental insurance (52%). Ranking lower on their priority list were critical illness insurance (35%) and long-term care insurance (33%).
"Voluntary benefits have great value for both employers and employees. Unlike traditional health insurance paid for entirely or in part by employers, voluntary benefits typically are a cost-effective option for employers to provide," said Jim Gemus, senior vice president of Prudential Group Insurance. "For employees, the benefits offer a convenient and affordable way to purchase life, disability, long-term care, dental and vision insurance, while offsetting the income-related risks of a disability, long-term illness or the death of the family member."
Employees increasingly view the workplace as an important source for personal insurance and savings products. Half (51%) of workers cited convenience as the most common advantage and driving factor in purchasing voluntary benefits because they pay for them through payroll deduction, representing a nine-point increase since the study was conducted in 2008. 52% feel that offering voluntary benefits increases the value of their company's offerings.
The study found a correlation between voluntary benefits offerings and employee satisfaction. For employers, employee satisfaction is the top gauge of success (47%) followed by achieving a certain set participation rate (34%). Gemus noted, "Employees' increasing interest and knowledge of their benefits options, combined with employers' renewed focus on employee satisfaction is a win-win situation for all."
Reflecting its commitment to education, Prudential has launched a new online educational resource open to all, with tips and tools to help consumers understand voluntary benefits and make informed benefits decisions. Visit www.prudential.com/benefitsmatter to learn more.
Gauging the Success of Voluntary Benefits is the second in a series of five research briefs that highlight the major findings from Prudential's Sixth Annual Study of Employee Benefits: Today & Beyond. The research was conducted via the Internet during April and May of 2011, and consisted of three distinct surveys of plan sponsors, plan participants, and broker/consultant audiences.
Prudential Group Insurance manufactures and distributes a full range of group life, long-term and short-term disability, long-term care, dental, and corporate and trust-owned life insurance in the U.S. to institutional clients primarily for use in connection with employee and membership benefits plans. The business also sells individual long-term care insurance, and accidental death and dismemberment, and other ancillary coverages and provides plan administrative services in connection with its insurance coverages.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. In the U.S., Prudential's iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit http://www.news.prudential.com/.
Exit Strategies: Don't Plan Without Them
Times have changed for split-dollar planning, and so have many of the rules
By Timothy C. McFarland, JD
Mr. McFarland is a principal with ABM, LLP, Boston. He can be reached at tmcfarland@abm-llp.com
Part I In A Two-Part Article
Historically, many advisors put their clients in split dollar plans without much thought given to when and how their clients would get out. Advisors may have assumed that policy cash values (in an equity split dollar plan) would be used to roll out of the plan or that the client's death would complete the plan. More recently, third-party premium finance and private finance arrangements have been put in place for clients as an alternative to split dollar. Again, however, advisors have not adequately addressed when their clients should and how their clients can get out of such plans in the future while maintaining the desired amount of insurance. Some of these plans likely were sold with no thought given to the possible need to exit the program. Many others unreasonably assume interest rates on policy loans will remain at historically low levels for the insured's lifetime.
Times have changed and the rules have changed.
Clients recognize the need for liquidity to achieve their estate planning (and often combined business succession planning) goals and to pay estate taxes. They also understand that internal rates of return on today's life insurance products can make insurance the best choice to meet liquidity needs. For many clients, then, the question is not whether to buy life insurance, but rather how to pay for it in a gift-tax efficient manner.
If a client has available sufficient annual exclusions, paying premiums is relatively straightforward: the client makes annual gifts of premium dollars to a well-drafted irrevocable life insurance trust (an ILIT) and uses annual exclusions (and gift-splitting, if the client is married) to shelter the annual gifts from the federal gift tax. However, oftentimes annual premiums for an insurance policy exceed available annual gifting capacity. This may be the case because of the insured's age, health status, or the amount of death benefit needed. Or, the client may already have an annual gifting program established for children and grandchildren and does not want to stop making such gifts,
In the alternative, clients can use their available lifetime gift-tax exemption to cover premiums. With the increase in the lifetime exemption to $5,000,000 per person (or $10,000,000 for a married couple) at least through December 31, 2012, this option requires serious consideration. However, given that the current exemption level sunsets at the end of 2012, to insure that this option is viable in the future clients generally must consider a large one-time gift of cash or income-producing assets. If clients have the desire and wherewithal to make such a gift, they can do so and keep their insurance planning relatively simple. Unfortunately, many clients do not have the desire or wherewithal to do so. In such cases, clients must consider other options.
Fortunately, such options abound. Clients still have tax-efficient strategies available to pay premiums. Indeed, non-equity split dollar arrangements are alive and well (particularly for survivorship cases). Clients also have third-party financing programs available, as well as a myriad of private financing (private loan) arrangements to consider. In addition, clients can 'piggy back' off a sale of assets to an intentionally defective grantor trust.
The key for advisors is to anticipate future contingencies and put in place exit strategies that will permit their clients to maintain the desired level of insurance far into the future. With split dollar arrangements, advisors should anticipate that there will come a point when annual economic benefit costs will become prohibitive. In survivorship cases, this will likely occur upon the first death. In addition, advisors should be aware that the policy may go into a gain position in the future. In a non-equity split dollar arrangement, if the policy goes into gain, the plan may unnecessarily return more value to the client’s taxable estate in the form of an increased split dollar receivable. In a third party premium finance case or a private finance case, interest rate risk is a significant factor that must be considered. We are in a low interest rate environment now but rates will likely rise, and prolonged increases in interest rates may very quickly turn a financing plan upside down. In a third-party financing arrangement, all of the death benefit may be lost to repayment of the debt and, indeed, may require additional funds to satisfy the debt. In a private finance arrangement all of the death benefit may be returned to the client's estate and the client may be deemed to have made a taxable gift if the debt is greater than the death benefit.
Fortunately, potentially powerful exit strategies are available to complement any premium payment arrangement. The key is to have sufficient funds become available to the ILIT at a given point in time to enable the ILIT trustee to roll out of a split dollar arrangement or pay off a third-party or private loan balance. If future premiums are contemplated, the fund must also be sufficient to pay ongoing premiums. Thus, an effective exit strategy must provide the needed funds at the right time and in a gift-tax efficient manner. A zeroed-out grantor retained annuity trust (a 'zeroed-out GRAT'), a properly structured zeroed-out charitable lead trust (a 'zeroed-out CLAT'), or a sale of assets to an intentionally defective grantor trust can be an ideal exit strategy.
A zeroed-out GRAT can be an especially effective exit strategy in this current low interest environment. A zeroed-out GRAT is simply a GRAT where the present value of the donor's retained interest (determined according to IRS assumed interest rates and rules) is set as close as possible to the fair market value of the assets gifted to the GRAT. The value of the gift for federal gift taxes purposes is the difference between the fair market value of the assets gifted to the GRAT and the value of the donors retained interest. Thus, if the value of the donor's retained interest is set as close as possible to the fair market value of the gifted assets, the amount of the gift will be effectively zero. Moreover, if the actual total rate of return on the asset (cash flow and principal growth) is greater than the IRS's assumed interest (1.4% for October 2011), the excess return will inure to the benefit of the GRAT remainderman. The leverage or arbitrage can be enhanced if fair market value discounts are available (e.g., a lack or marketability discount, a minority interest discount, or a discount for lack of voting rights).
If the remainderman of the GRAT is the client's ILIT, the client can move assets to the ILIT with little or no gift tax cost. The ILIT can then use the GRAT remainder assets to pay off any amount owed under a split dollar arrangement, third-party premium finance arrangement, or private finance arrangement. If desired, the GRAT remainder can be set to yield an amount that will permit the ILIT trustee to exit the premium payment arrangement and continue to make any ongoing premium payments. This can be done on a sinking-fund basis. In the alternative, if the GRAT assets are high income producing assets (such as an interest in an S corporation or limited liability company) the GRAT remainder can be set to an amount that will permit the trustee to exit the premium payment program and use future cash flow from the remaining assets to pay ongoing premiums. This latter approach can be particularly desirable if the client wishes to use the GRAT not only as an exit strategy but also as an 'estate freeze' technique.
The term of the GRAT can be set to the date the client wishes to exit the underlying premium payment arrangement. Of course, for a zeroed-out GRAT to work, the donor must survive the GRAT term. What term to use will depend on the client's age, health, and total expected return of the GRAT assets. In practice, the client may choose to use one GRAT, or so-called laddered GRATs (such as a series of 3-year, 5-year, 7-year and 10-year GRATs), or a 2-year rolling GRAT (a 'Walton-type' zeroed-out GRAT).
Part II
Consider a sixty year-old client (standard non-smoker) who wishes to purchase a single-life guaranteed universal life policy with a $5,000,000 death benefit on a 12-pay basis. Assume that the premium is $190,000 and that the client has no available annual exclusions and does not want to use his and his wife's remaining lifetime exemption.
The client will enter into a private finance arrangement for 12-years. Each year the client will lend his ILIT the premium amount. Interest on the loan will be set to the applicable federal rate (the 'AFR) in effect on the day each premium loan is made (for simplicity the AFR is assumed to average 5% for each loan (well above the October 2011 long-term AFR of 2.95% ), and will be capitalized and added to principal on an annual basis. The ILIT will be 'defective for federal income tax purposes. Thus, the loan will be ignored for income tax purposes (See Rev. Rul. 85-13). Because the premium advances will be structured as a loan, the parties will account for the premium advances as loans and the principal and capitalized interest will be repaid to the client, the loans should be respected for gift and estate tax purposes (See Miller v. Comm'r, TC Memo 1996-3). In this scenario, the client wants to completely exit the program in twelve years.
The client owns stock in a profitable S corporation. The S corporation provides 8% cash flow and is assumed to be growing at a modest 2% per year. The client owns voting and non-voting stock. The client will make a gift of non-voting stock worth approximately $2,000,000 (assuming a 30% valuation discount) to a 12-year zeroed-out GRAT. The GRAT will pay an annual annuity to the client in the amount of approximately $125,000 for twelve years (based on the October 2011 Section 7520 rate of 1.4%). At the end of 12 years, the GRAT will pour over the remaining assets (assumed to be $3,175,000) to the ILIT. The ILIT trustee will use the GRAT assets to repay the entire balance due on the premium finance loans (assumed to be $3,175,000). Because the ILIT is defective for income tax purposes, the use of appreciated assets to repay the loan will not cause adverse income tax consequences. The client will have a $5,000,000 guaranteed contract that requires no further premium payments outside of his estate for future liquidity.
If a client is charitably inclined and wishes to make current gifts to charity, the client may want to consider a zeroed-out CLAT. A zeroed-out CLAT functions much like a zeroed-out GRAT except that the lead or annuity interest is paid to the client's charity rather than the client. In addition, there are stringent rules that must be followed in order to avoid adverse tax consequences when a CLAT is contemplated. These rules limit the types of assets that can be effectively used in a CLAT that will serve as an exit strategy. As a practical matter, only assets that generate passive income or passive investments should be used. (i.e., interests in an active business generally should not be used). Nevertheless, with the right asset, a charitably-inclined client can exit his premium payment plan and meet his charitable objectives with a zeroed-out CLAT.
Finally, a client may be considering a sale of assets to an intentionally defective grantor trust as a tax-efficient 'estate-freeze' technique. Rather than making a gift of the assets, the client sells the assets to the trust for a note at the long-term AFR in effect on the date the sale is made. Often, the client will 'seed' the trust with a gift of cash or other assets equal to 10% of the fair market value of the assets to be sold. Usually, the note is interest only with a balloon principal payment due at the end of the note term (e.g., 10, 15 or 20 years), although prepayments generally are permitted without a prepayment penalty. The cash flow from the assets can be used to service the debt.
The 'freeze' is accomplished because the client exchanges assets with a high total return for a note at the long-term AFR. With interest rates at historical lows, the leverage or arbitrage can be significant. All of the return in excess of the debt service is moved out of the estate at minimal gift tax cost (the value of the 'seed' gift). As with a zeroed-out GRAT, the leverage or arbitrage of the sale can be enhanced if fair market value discounts are available. The sale is ignored for income tax purposes because the trust is drafted to be defective for income tax purposes. However, the client continues to be responsible for taxes on the income earned in the trust. By having the client pay the income taxes, the client depletes his estate at income tax rates rather than estate tax rates (a partial tax bracket arbitrage) and permits the gross income to be put to work in the trust.
Advisors can 'piggy back' off the defective sale technique by suggesting that the defective trust hold life insurance as well as the sale assets. Any excess cash flow from the sale assets can be used to pay premiums on a life insurance contract with no additional gifting required. By combining the sale with the purchase of insurance, clients can achieve significant leverage. What if the cash flow will not be sufficient to meet the debt service and pay premiums in the early years of the program but is expected to increase significantly over time, or the assets may be sold in the future? It may be possible to combine a split dollar plan, a third-party premium finance plan, or a private finance plan with a sale to a defective ILIT. The client may choose to fund the premiums under one of these plans for a number of years. At the point when the asset's cash flow has increased significantly or the assets are sold by the ILIT, the premium payment plan can be frozen. The ILIT trustee can then service the premium debt as well as the note from the asset sale in addition to meeting ongoing premium payments. In this way, the client may be able to achieve at least a partial estate freeze and finance desired insurance coverage in a gift-tax efficient manner.
Assume the same client in the example above. The client has limited liability company (LLC) interests in a real estate development project that will be completed in several phases and, as each phase is completed, the value of the client's interest will increase significantly in value. Moreover, current cash flow is minimal but is expected to increase significantly as the project is completed. Rather than GRAT his S corporation interests, the client decides to sell a portion of his LLC interests to the ILIT for 20-year interest-only balloon note with an AFR of 2.95% (the long-term AFR for October 2011). During the early phases of the development, the ILIT trustee will use the cash flow from the LLC to pay interest on the sale note. Any excess cash flow will be side funded. As soon as cash flow reaches a critical level, the ILIT will use the increased cash flow to pay down the private finance loan. At the end of the 20-year term, the ILIT trustee will also repay the principal balance on the LLC note. The client will have accomplished a significant estate freeze and will have the $5,000,000 guaranteed contract outside of his estate.
As can be seen, clients have many options available to pay large premiums in a gift-tax efficient manner. Whether to use private split dollar financing, private financing, or third-party premium financing, with a zeroed-out GRAT or a zeroed-out CLAT as the exit strategy, a sale of assets to an intentionally defective grantor trust, or a combination of these techniques will depend on the client's asset picture, needs, goals, and tolerance for planning. In addition, consideration should be given to whether to incorporate the use of the increased lifetime gift tax exemption before it sunsets on December 31, 2012. Finally, consideration should be given to generation-skipping transfer tax ('GST tax') planning if the client is interested in multi-generational planning.
The key is to put in place today the exit strategy for tomorrow.
Finding Ways to Pay for College
MassMutual Retirement Services to Host RetireSmart Participant Seminar on November 9,
Farnoosh Torabi Unveils Financial Strategies and Resources Available To Help With Tuition Expenses
SPRINGFIELD, Mass., MassMutual Retirement Services will conclude its 2011 web-based RetireSmart participant seminar series with "Finding Ways to Pay for College," featuring special guest Farnoosh Torabi, independent Generation Y money coach, best-selling author and personal finance journalist.
MassMutual's live online seminar is scheduled for Wednesday, November 9 at 12:00 p.m. ET. The 30-minute presentation is suitable for participants of all ages, as it will cover repayment strategies for recent graduates, ways to finance graduate school, the basics of 529 plans, and how parents may choose to share the costs with their children. The session will conclude with ways to take full advantage of loans, scholarships and Federal aid, followed by a 30-minute interactive question and answer session.
A recent State of the American Family Stud sponsored by MassMutual found that parents today struggle between saving for their children's college education and their own retirement. "MassMutual truly understands the difficulty parents experience in balancing these competing priorities," says E. Heather Smiley, chief marketing officer for MassMutual's Retirement Services Division. "This seminar will arm parents with financial strategies to help them successfully plan for both their children's education and their own retirement," adds Smiley.
MassMutual Retirement Services' previous seminar, "Ready or Not, Retirement is Coming" was a big hit with older participants, with 71% of attendees being over the age of 51. Vera Gibbons, finance journalist and national TV correspondent, addressed current issues pre-retirees are facing, offered suggestions for those who are not feeling prepared, and concluded with financial tips to help prepare individuals for living on a fixed income. A free replay of this seminar can be accessed from www.retiresmartseminars.com.
Space for the upcoming "Finding Ways to Pay for College" seminar is prioritized to retirement plan sponsors and participants on MassMutual's platform. MassMutual retirement plan clients can register by logging in to their retirement plan account at www.retiresmart.com.
For more information about MassMutual Retirement Services, please contact your retirement plan advisor or call MassMutual at 1-866-444-2601.
(1) Results from MassMutual's State of the American Family Study, administered to 1,143 respondents from January 4 - January 20, 2011. To learn more about this study and to find help with planning for your families' financial future, logon to MassMutual's Family Finances web page at massmutual.com/familyfinances.
The information within this presentation is solely the opinion of the speaker, Farnoosh Torabi, an independent orator, who is not an employee of MassMutual Financial Group.
About MassMutual
MassMutual's Retirement Services Division has been serving retirement plans for 65 years. It offers a full range of products and services for corporate, union, nonprofit and governmental employers' defined benefit, defined contribution and nonqualified deferred compensation plans. It serves approximately 1.3 million participants.
Many Seniors Connect Well-being to Time They Spend with Family
Humana, National Council on Aging survey reveals seniors opinions on family and active lives
- 70 percent of seniors say they wish they saw their families more; 90 percent 'revitalized' by family time
- Humana and KaBOOM! creating multigenerational playgrounds and reunion gathering areas in 8 cities
LOUISVILLE, Ky.--(BUSINESS WIRE)--"Come back soon" is a common request from seniors when their families depart after a get-together. A new survey of 1,500 seniors indicates that some seniors' health and well-being may depend, in part, on how much time they spend with their extended families.
"In addition to providing fun and accessible family reunion sites, the fitness stations can serve older adults throughout the year as a safe place to exercise, which is a core strategy for reducing falls and promoting healthy aging."
The survey, commissioned by the National Council on Aging and Humana Inc. (NYSE: HUM), suggests that family reunions and relationships inspire seniors to stay active and pursue their well-being. It found that nearly 90 percent of seniors surveyed feel revitalized when they spend time with families. And 70 percent say they wish they saw their families more throughout the year.
Also, the survey revealed that seniors have a strong desire for maintaining and strengthening family relationships, with 45 percent saying their families don't hold enough reunions. In addition, to stay connected with their families, nearly one-third of seniors see themselves as the 'connector' in the family - meaning they believe their role is to encourage communication among the other family members and help coordinate family gatherings and reunions.
"We at Humana partnered with the National Council on Aging to commission this survey because we wanted to better understand what seniors think about the importance of their family relationships - and as a result gain insights into how we might be able to help seniors strengthen their family ties and health," said Tom Liston, senior vice president of senior products at Humana, and leader of the company’s Medicare organization.
In addition to regularly connecting with their relatives, staying active is also important to seniors, especially when it involves their families.
- 80 percent of surveyed seniors said they exercise for 30 minutes at least once a week, and seven in 10 report they exercise for 30 minutes at least three times a week.
- Nearly one third expressed interest in a multigenerational playground and reunion space where their families could gather, exercise and build memories.
- Humana and KaBOOM! building 8 playgrounds and reunion gathering areas
Reflecting seniors' wants and needs, Humana is partnering this fall with KaBOOM! to build eight multigenerational playgrounds and family reunion gathering areas in eight cities over eight weeks. The first build is today in suburban Seattle. KaBOOM! is a national nonprofit organization that has built more than 2,000 playgrounds. This effort, with Humana, represents one of the largest-scale multigenerational build efforts by a single corporate sponsor.
"A growing need exists for safe, multigenerational recreation spaces that benefit all ages, including grandparents, parents and children," said Lynn Beattie, vice president, injury prevention, at the National Council on Aging. "In addition to providing fun and accessible family reunion sites, the fitness stations can serve older adults throughout the year as a safe place to exercise, which is a core strategy for reducing falls and promoting healthy aging."
"Humana certainly is at the forefront to help fill this growing need for places that promote multigenerational play"” said Darell Hammond, KaBOOM! founder and chief executive officer. "Humana's eight-playground project ranks among the largest concentrated efforts of building multigenerational playgrounds that we have executed to date."
Playgrounds will be built in Seattle; New Orleans; Greensboro, N.C.; Albuquerque, N.M.; Tucson, Ariz.; Nashville, Orlando and San Antonio from today through early December. Each playground will be designed by local residents and include traditional, kid-friendly equipment such as slides and monkey bars as well as features such as senior-focused fitness stations. The playgrounds will also feature family reunion gathering areas to inspire family picnics and get-togethers.
"Humana is dedicated to promoting lifelong well-being for people of all ages. Through this playground partnership with KaBOOM! we are offering families an opportunity to enjoy physical activity and a stronger sense of belonging - two important ways to achieve greater well-being," said Humana's Liston. "We're focused on specific resources that Humana can offer seniors to stay active and mobile while enjoying the company and support of their families and loved ones."
While playground fitness stations will differ from market to market, all will feature textured and non-slip surfaces to promote stability and safety. Further, each playground will include equipment that enables a wide variety of exercises.
Families across the U.S. have an opportunity to win a playground for their own community by entering the Build a Family Legacy sweepstakes on www.Humana.com/family through Nov. 30. The Grand Prize winner will receive a custom-designed KaBOOM! playground that will be built in or near the winner’s home town and donated in the winner’s name by Humana.
For more information, please visit www.Humana.com/family, www.Kaboom.org, or www.NCOA.org.
About Humana
Humana Inc., headquartered in Louisville, Kentucky, is a leading health care company that offers a wide range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. By leveraging the strengths of its core businesses, Humana believes it can better explore opportunities for existing and emerging adjacencies in health care that can further enhance wellness opportunities for the millions of people across the nation with whom the company has relationships.
IRI: Advisors Serving Growing Elder Market
Face Unique Retirement Planning Challenges
Wealth is concentrated in the senior market; Advisors challenged to inform
WASHINGTON, D.C. - The Insured Retirement Institute (IRI) this week released the report Retirement Planning and the Elder Market: Advisor Strategies to Understand and Work with Senior Clients. The report explores the challenges advisors face in conveying pertinent information to older clients, a market segment that is growing in both number and net worth. The report found the highest median net worth is among individuals between ages 55 and 64 while senior citizens, age 75 years and older, have a net worth nearly 20 percent higher than that of Boomers between ages 45 and 54.
IRI research found that two-thirds of advisors report their clients have asked them about annuities; and, Boomers identified guaranteed income and principal protection as the most important trait of a retirement investment. During the retirement strategy discussion, advisors must be certain their elder clients understand all the options, features, benefits and costs of the annuity products under consideration.
The report also found that social and family issues take on a greater importance for older investors, often including a variety of aspects related to lifestyle changes in retirement and the participation of family members and others in the decision-making process.
"Advisors serving older clients should be prepared to meet their unique financial needs and create an investment plan that addresses the sometimes difficult lifestyle and family issues this population must often tackle," said IRI President and CEO Cathy Weatherford. "This report shows that many in the elder market are still in need of formal financial advice. It also found that advisors serving older clients are making efforts to increase their client interactions by following-up with written summaries and sending copies of all correspondence to a secondary addressee such as a family member. That is an important step in ensuring that these clients understand their investment goals and options."
The report also found:
- The number of Americans between the ages of 55-59 grew 46% since 2000; the number in the 60-64 year-old segment grew 56% during the same period.
- There has been notable growth among the oldest Americans, a 30% increase in the number who have attained age 85 over the past decade.
- Boomers, defined as those who are between ages 60 and 65 in 2011, are in need of retirement income advice, 51% believe they will not have enough money on which to live comfortably through retirement, and two-thirds would like to leave an inheritance to their loved ones.
- Fewer than half (45%) of older Boomers have ever consulted a financial advisor.
- Only 58% have determined the amount of money they will need to save for retirement.
The key findings and analysis can be found here.
About the Insured Retirement Institute
The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry. Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: our members are the major insurers, asset managers, broker dealers and more than 75,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella. IRI’s mission is to: encourage industry adherence to highest ethical principles; promote better understanding of the insured retirement value proposition; develop and promote best practice standards to improve value delivery; and to advocate before public policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.
Economic Volatility Raises Doubts over Retirement and College Savings
Half of non-retirees surveyed question whether employer plans are adequate ways to save;
one-quarter reduce or stop saving for college
MINNEAPOLIS - Given the recent economic and stock market volatility that has wreaked havoc on many Americans' savings, 51 percent of non-retirees now question whether 401(k), 403(b) and 457 plans are adequate ways to save for retirement, according to a recent survey* from Allianz Life Insurance Company of North America (Allianz Life). Moreover, an alarming 27 percent feel that the safest place for any money left over after paying their expenses is underneath their mattress.
"Recent events have only deepened the uncertainty many have felt about retirement since the market meltdown of 2008 when the average 401(k) account balance lost nearly 30 percent of its value."
Americans are also cutting back on saving for their children's education, with 25 percent saying they have either reduced or stopped saving altogether for college. Among non-retirees, nearly half (47 percent) feel their retirement savings habits have been impacted by the current economic environment. Nearly 20 percent have reduced spending on other things to keep saving for retirement at the same rate, and 30 percent have either decreased the amount they've been saving for retirement or have stopped saving all together. Additionally, more than one-quarter (28 percent) have not even started saving for retirement at all.
"Given the gut-wrenching events and market volatility of late summer, consumers are questioning traditional retirement savings vehicles and changing their savings habits," said Katie Libbe, Vice President of Consumer Insights at Allianz Life. "Recent events have only deepened the uncertainty many have felt about retirement since the market meltdown of 2008 when the average 401(k) account balance lost nearly 30 percent of its value."
ESRPs Top List of Investment/Retirement Products
Currently, 61 percent of U.S. non-retirees own investment/retirement savings products such as employer-sponsored retirement plans (ESRPs), stocks/bonds/mutual funds, pensions or annuities; 39 percent do not own any of these. Topping the list of investment/retirement savings products are ESRPs (401(k), 403(b) and 457 plans), with nearly half (47 percent) of non-retirees owning them. Stocks, bonds or mutual funds outside of ESRPs are held by 27 percent of non-retirees.
College Savings Takes a Hit
The economic environment is also leading to cutbacks in college savings. While 25 percent are contributing less or have stopped saving entirely, a troubling four-in-10 (44 percent) have not started saving for their children's college education at all. A meager 15 percent have reduced spending on other things to keep saving/paying for their children’s college educations.
"This could mean that students will have to be more creative in their use of grants and loans in order to make up potential shortfalls," said Libbe.
Retirement vs. College Savings - Men vs. Women
Nearly half (46 percent) of non-retirees feel saving for retirement is an equal priority to saving for their children's college education. While 22 percent feel saving for college takes priority over retirement, 32 percent think otherwise, ranking retirement as a higher priority.
"Retirement and college savings often draw from the same bucket of available funds, and people have a hard choice to make," said Libbe. "Our research shows that lower income households feel paying for their children's education takes priority over saving for their own retirement. We also found that between the sexes, 39 percent of men placed saving for their own retirement ahead of saving for their children's college education, versus 27 percent of women. Conversely, 53 percent of women felt that retirement and college savings were equal priorities, versus 37 percent of men.
"The toll taken by recent economic volatility has yet to be fully calculated, but one thing is certain: it has directly impacted how people are approaching saving for retirement and college."
About Allianz Life
Allianz Life Insurance Company of North America has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income goals with a variety of annuities and life insurance products. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with nearly 155,000 employees worldwide. Based on its revenue, Allianz SE is the 20th largest company in the world (Fortune Global 500, August 2010).
Allianz Life Insurance Company of North America offers insurance and annuities in all states except New York. In New York, products are issued by Allianz Life Insurance Company of New York, New York, NY.
*Allianz Life Insurance Company of North America conducted an eNation survey, The State of the Economy's Impact on College & Retirement Savings (+/- 3.1% margin of error), through Synovate Research in August and September 2011 with 1,000 respondents. Full results are available upon request.
Five Things That Insurers Need to Know to Capture More Retiree Assets
LIMRA: Diversified investments may not work to your client's advantage in the payout phase
WINDSOR, Conn., Oct. 5, 2011 - A new LIMRA study reveals that 45 percent of retirees still have their assets in their retirement savings plans with their employers, most frequently in their 401(k) plans, and almost a fifth of retirees own three or more IRAs in their households.
The online survey of retirees was conducted in October 2010. Qualified respondents were aged 55 to 79; had been retired for at least one year and had not worked for pay within the past year; and had household incomes of at least $35,000. Furthermore, qualified respondents were personally involved in making decisions about their household savings and investments.
"While many retirees may think retaining multiple retirement plans or IRAs is a good diversification plan, doing so can make it difficult to measure whether their investments are effectively aligned with their retirement goals," said Jafor Iqbal, associate managing director of LIMRA Retirement Research. “Consolidating assets under one professional manager or institution gives retirees access to information and guidance, typically at a lower cost, to help make the most out of a retirement plan.”
Among the survey respondents, 23 percent said they have relationships with insurance companies. The mass affluent retirees with assets of $100,000 to $500,000 are more likely to have relationships with insurance companies than any other market segments. However, as a whole, retirees have only 9 to 10 percent of their assets invested in products and services offered by insurance companies.
With more than $400 billion in the annual IRA rollover market, it is important that insurers understand what motivates retirees and pre-retirees to rollover or consolidate their money with a financial firm.
Provide online resources
According to LIMRA consumer surveys, retirees start to think about the decision of what to do with their retirement plan balance well in advance of retirement. Providing online resources like retirement calculators and checklists can help insurance companies develop relationships with employees approaching retirement and build brand awareness.
Be responsive and ready to react quickly
Once they retire, those that do roll over their assets move their money fast. Earlier LIMRA research shows majority of retiree assets leave their employer-sponsored plans within the first 12 months of their retirement.
Provide a comprehensive plan which creates a retirement income stream and addresses other risks retirees face
Retirees and pre-retirees will typically need to make a series of retirement-related financial decisions starting at age 59 ½, the age at which they can withdraw from their tax-qualified assets without penalty, to age 70 ½, when they must take IRS required minimum distributions (RMD) from their qualified savings. In between, they have to evaluate when to take Social Security benefits and enroll in Medicare and its supplements. All of these financial decisions can be part of a retirement plan. LIMRA research shows that many investors are buying guaranteed income annuity products at these key age-based financial decision points.
Reach out to pre-retirees and establish a relationship before they enter retirement
Existing relationships are critical to securing rollover business. A financial planner or advisor is often the first person retirees or pre-retirees consult regarding the rollover decision if they have an existing relationship. If possible, offering personalized investment guidance can be a way for companies to strengthen relationships and increase their chances of retaining assets.
Offer guidance about taxes and other required distributions
Retirees both under and over age 70 need help managing their retirement plan assets to ensure they comply with all legal requirements. Sixty percent of retirees above age 70 who are taking withdrawals are only doing so to meet IRS required minimum distributions and they often take withdrawals through systematic withdrawal plans. The current research finds that most retirees get help from a financial professional or a phone representative to set up the plan.
"Bottom line, insurers need to do a better job communicating with their clients and prospects before they retire, when they are still making decisions on how to invest their money in retirement," Iqbal noted. "The difference between capturing the assets and losing them to a competitor is whether you are with your clients when they have to cross some of the financial decision points before and during retirement."
About LIMRA
LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com
How recession can change the face of retirement
by Mary Jane Fortin
Ms. Fortin is President & CEO of American General Life Companies, part of SunAmerica Financial Group. She can be reached at Mary.Jane.Fortin@aglife.com
It is no secret that the face of retirement is changing in the wake of the recession. As the first members of the baby boomer generation began turning 65 this past January, many are working longer, have suffered losses in their investment portfolios and home values, have adult children returning home, and have parents needing care. In fact, some 'retirees' find themselves headed back to the workforce.
The fiscal debates and challenges that have been raging in Washington have done nothing to alleviate their concerns. As responsibility for managing retirement savings shifts from corporations and governments to individuals, more than ever, Americans need help to achieve their protection, savings and retirement income needs. As an increasing number recognize that they can't do it themselves and that they need professional guidance, those of us fortunate enough to be in the financial services industry have an unprecedented opportunity to help them overcome some of these obstacles and develop a sound plan to reach their retirement goals.
In 2001, SunAmerica Financial Group (SAFG) and Age Wave launched the Re-Visioning Retirement Study. This comprehensive study was one of the first to look beyond basic financial and demographic issues to reveal the attitudes and expectations of retirees nationwide. This year, we rejoined forces to launch a new initiative: the 2011 SunAmerican Retirement Re-Set Study.* As part of SunAmerica Financial Group, American General Life Companies is pleased to share these useful insights regarding how the mindset, expectations and financial planning for retirement have changed in the past decade.
Some highlights of the study include
- We've seen a retirement mindset re-set: 54% view retirement as a new chapter in life rather than a winding down - a significant increase over the 38% that held a similar view in 2001.
- People have re-set the timing and purpose of retirement: retirement is being postponed by five years - from 64 to 69 - triggered in part by increasing longevity as well as the recession and financial need. And retirement no longer means the end of work: almost two-thirds say they would ideally like to remain productive and include work in retirement.
- Achieving financial peace of mind has replaced wealth accumulation as today's primary financial goal. People are now six times more likely to say their top financial goal is 'saving enough to have financial peace of mind' (82%) versus 'accumulating as much wealth as possible' (13%).
- Nearly half of Americans 55 and older expect to provide intergenerational support for family members and, in a new twist on childcare, 70% of those believe their adult children will need financial assistance.
- And nearly half of today's retirees retired earlier than they planned. The top reason? Unexpected health problems.
Protection solutions - including life insurance, critical illness and long term disability, to name a few - have never looked better. Ninety-six percent say it is important to protect themselves, as well as younger and older family members from financial uncertainty. As those of us in the industry are well aware, life insurance offers a foundation for financial security and is the underpinning of a sound financial plan. From the pure protection of term insurance to the accumulation and death benefit features of permanent products, such as guaranteed universal life, consumers have many choices to fill this most fundamental need.
Protecting assets is now five times more important than higher-risk returns. Almost two-thirds (65%) now want investments that are guaranteed not to lose value and 60% seek to protect their income from market loss and guarantee it for life. The member insurers of American General Life Companies have responded to the desire for guarantees by introducing two new universal life products offering guaranteed death benefits and guaranteed cash accumulation. Our index annuity portfolio has been enhanced with a new optional rider that offers guaranteed lifetime income. In addition, supplemental accident & health products provide protection against the financial devastation that could occur as the result of a critical illness, injury or disability. Long term care products can help protect assets and, in some cases, even allow for care in the comfort of the policy holder's home. And annuities provide consumers the opportunity to save for retirement, guaranteeing supplemental retirement income.
Half of the study's respondents believe they may need to provide inter-generational support for family members, with 68% of those responding that they might need to provide some level of financial assistance for adult children and 60% for grandchildren as well as for siblings and elderly parents. The study results indicate that support for older children may extend many more decades than originally anticipated. Financial advisors should take the potential for intergenerational support into consideration when conducting a beneficiary review with existing clients and also when selling new policies.
Once relegated to a lucky few, living a long life is increasingly becoming the norm. The number of people who have celebrated their 100th birthday has more than doubled in just the last ten years. Two-thirds of the survey's respondents say their goal is to live to 100. In addition to worries about serious health problems or becoming a burden on their family, almost half of the respondents were worried about running out of money to live comfortably. Universal life products that offer flexibility and guarantees can provide the benefits that so many are seeking when it comes to longevity and finances.
Consumers can no longer rely solely on company pensions and Social Security to provide the financial peace of mind they need in retirement. This reality provides for tremendous opportunity in the insurance industry for carriers, distributors and advisors to help Americans plan for a secure retirement. Real financial peace of mind comes from taking action and putting a plan in place - which they control - that both protects their family’s future and puts them on a systematic path to saving for retirement.
More adults 55 and older today have used professional financial advisors to assist with retirement planning than 10 years ago (49% versus 40%). And those who have used financial advisors are 72% more likely to feel very financially prepared for retirement. Regular communication, a healthy dose of financial education, and sound advice centered on consumers' desire for guarantees, stability and protection are critically important to an advisor's success.
When people described their ideal financial advisor, effective communication and listening skills are ranked higher than achieving competitive returns. They want their advisors to speak their language and not to use industry jargon that too often confuses important decisions. They want their advisors to listen and understand what is important to them and understand their unique retirement hopes, worries and priorities before choosing and recommending the most effective strategy. And they want their advisors to contact them regularly during both good times and bad.
When it comes to retirement, Americans fall into four distinct categories driven by three key factors: optimism or pessimism in respective world views; how socially engaged, active and connected they are; and how well they plan and prepare for retirement.
- 20% are Ageless Explorers, and have a positive, active and fulfilling vision of retirement as a new chapter in life with new opportunities.
- 18% are Cautiously Contents who seek a traditional retirement with more rest, relaxation and leisure.
- 27% are Live for Todays who have many retirement ambitions, but often find themselves financially unprepared.
- 35% are Worried Strugglers who are the least happy and see retirement as a period of financial worry and stress.
Helping your clients understand which category they feel they currently occupy and which category they aspire to be in during retirement can be a very effective and non-threatening way to begin the conversation about financial and retirement preparedness with them.
The retirement market is a $15 trillion market today and is expected to grow by nearly 6% a year, reaching $20 trillion by 2015. With roots going back to 1850, American General Life Companies currently serves more than 13 million Americans. Understanding the needs and concerns of today's consumers is important to our organization, our distribution partners and the clients they serve. Now, more than ever, Americans are turning to advisors for professional financial advice and are seeking the benefits that life insurance and accident & health products offer. I truly believe this is the best time to be in the financial services industry.
Take a moment to review the findings from the SunAmerica Retirement Re-Set Study at www.retirementreset.com. The results will help you better understand your clients and help you open the door to new prospects.
American General Life Companies, www.americangeneral.com, is the marketing name for a group of domestic life insurers. SunAmerica Financial Group is one of the largest life insurance and retirement services organizations in the United States. The organization traces its origins to 1850 and today is among the largest issuers of annuities and life insurance in the United States, as well as a leading provider of defined contribution plans in the education and healthcare markets. Through its American General, AGLA, VALIC, Western National, SunAmerica, Royal Alliance, SagePoint Financial and FSC Securities businesses, it offers a diversified portfolio of life insurance, investment and retirement savings products, guaranteed income solutions and financial planning services. SunAmerica Financial Group serves over 18 million customers and its products are sold by over 300,000 financial professionals. For more information, please visit http://www.safg.com.
* The 2011 SunAmerica Retirement Re-Set Study is a public opinion poll conducted by Harris Interactive in conjunction with Age Wave (the nation's foremost thought leader on population aging and its profound business, social, healthcare, financial, workforce and cultural implications) in the second quarter of 2011 with a national sample of 1,001 adults age 55 and older who were representative of the general population by income, ethnicity, geography and gender.
Product Innovations
The Hartford launches life insurance policy
designed to respond to changing interest rates
Issued with 2 interest crediting options
Hartford, Conn., October 4, 2011 - The Hartford has introduced Hartford Founders Plus, a new current assumption universal life insurance policy designed to respond to changing interest rates. The new product offers death benefit protection as well as two interest crediting options that have the potential to benefit from rising interest rates.
"Founders Plus was developed to ensure advisors continue to have new tools they can use to help meet the ever-changing needs of their clients and is another example of why we believe life insurance is an asset class," said Brian Murphy, head of The Hartford's life insurance business. "The new interest crediting approach will appeal to consumers and advisors who think today's historically low interest rates will eventually rise."
Policyholders receive death benefit protection and can receive interest credits through a fixed account based on rates declared by Hartford Life and Annuity Company or opt for the new plus account, in which a portion of the fixed interest rate is exchanged for an opportunity to receive additional interest credits tied, in part, to the performance of the S&P 500.
Founders Plus includes an extended no-lapse guarantee that ensures that the death benefit will be paid, often beyond age 85, even if there is no cash value in the policy.
If consumers also want to help protect themselves from the cost of becoming chronically ill, they can add the company’s LifeAccess Accelerated Benefit Rider to the Founders Plus policy for an additional charge. If they then become chronically ill, as certified by a physician, and meet rider requirements, the death benefit can be used to provide them with income they can use to, for example, pay family members to care for them at home.
Receiving rider benefits will reduce the life insurance death benefit available to the policy’s beneficiaries. The rider may not cover all of the costs associated with the chronic illness of the insured. Though the rider benefits are generally tax-free, in some circumstances, they may be taxable. The rider is not long-term care and is not intended to replace the need for long-term care.
Learn more about The Hartford's new Founders Plus life insurance policy and the optional LifeAccess Rider by calling 1-877-439-0772 or by visiting www.hartfordinvestor.com.
About The Hartford
The Hartford Financial Services Group Inc. (NYSE: HIG) is a leading provider of insurance and wealth management services for millions of consumers and businesses worldwide. The Hartford is consistently recognized for its superior service and as one of the world's most ethical companies. More information on the company and its financial performance is available at www.thehartford.com. Join us on Facebook at www.facebook.com/TheHartford. Follow us on Twitter at www.twitter.com/TheHartford.
How Volatile Markets are Forcing Americans to Redefine Financial Security
Top Business Leaders Embark on Multi-City 'Econo-ME' Tour
MILWAUKEE - Northwestern Mutual Chairman and CEO John Schlifske and Steve Forbes, chairman and editor in chief of Forbes Media, will speak to more than 3,500 business, community and student leaders in six cities around the U.S. this week.
...I look forward to discussing these issues and the opportunities they present. The ultimate goal of this tour is to help people throughout the country achieve financial stability and success...
The executives will provide their thoughts on the economy, the markets, and how individuals and business owners must redefine the rules of financial security during times of market volatility. As part of an ongoing partnership, Northwestern Mutual - a leading financial security company - and Forbes, previously shared messages about the economy to over 10,000 people in 12 other cities.
Now, the tour - titled Econo-Me: Redefining the Rules of Financial Security - will visit the following cities:
Oct. 3: Birmingham, Ala., and New Orleans
Oct. 4: Los Angeles and San Francisco
Oct. 5: Washington, D.C., and Baltimore
"Given today's volatile economy, financial security is no longer about just growing and managing assets. Rather, it means developing and sticking with a holistic financial plan that includes managing risks, and increasing and protecting assets over time," said Schlifske. "In partnership with economic thought leader Steve Forbes, we will share perspectives on financial security that will help individuals and business owners navigate through these uncertain times."
Among the key insights and topics Schlifske and Forbes are expected to share:
Now more than ever, consumers must make financial decisions based on their short- and long-term needs, not their emotions, and stick with it. Schlifske affirms the need for individuals and business owners not to forget proven principles, such as cutting spending, saving in addition to investing, and dollar-cost averaging for the long-term.
We cannot spend our way out of this recession. Schlifske and Forbes agree that pouring more money into the system, and increasing the debt, will only make the long-term solution that is needed more painful. Unless we are willing to endure years of austerity measures, more pro-growth policies need to be considered.
It will take time for the economy to get back to a more stable state, regardless of the outcomes of upcoming elections. Schlifske and Forbes believe that periods of bull markets take years to unwind, and Americans should prepare for a long period of retrenchment.
"One thing is clear in the face of all the economic uncertainty and volatility - the rules of financial security are being redefined," said Forbes. "I look forward to discussing these issues and the opportunities they present. The ultimate goal of this tour is to help people throughout the country achieve financial stability and success."
Photos taken at each tour event will be posted on the Northwestern Mutual Facebook page.
About Northwestern Mutual
The Northwestern Mutual Life Insurance Company - Milwaukee, Wis. (Northwestern Mutual), the 'World's Most Admired' life insurance company in 2011 according to FORTUNE magazine, has helped clients achieve financial security for more than 150 years. As a mutual company with $1.2 trillion of life insurance protection in force, Northwestern Mutual has no shareholders. The company focuses solely and directly on its clients and seeks to deliver consistent and dependable value to them over time. Northwestern Mutual and its subsidiaries offer a holistic approach to financial security solutions including: life insurance, long-term care insurance, disability insurance, annuities, investment products, and advisory products and services. Subsidiaries include Northwestern Mutual Investment Services, LLC, broker-dealer, registered investment adviser, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company, limited purpose federal savings bank; and Northwestern Long Term Care Insurance Company; and Russell Investments.
New Survey: Beneficiaries, Boomers Remain Confused by Medicare
One in two Americans over 60 still do not understand the health reform law;
even fewer are aware of important changes to enrollment rules and prescription drug costs
-Medicare confusion could be costing beneficiaries – nearly half have never shopped for coverage that could better meet their needs, and 85 percent of eligible beneficiaries have never applied for financial assistance
-A vast majority of baby boomers on the cusp of Medicare enrollment are uncertain about the program's long-term future; about two-thirds are nervous, overwhelmed or indifferent about the prospect of enrolling
WASHINGTON & Minnetonka, Mn. - The results of a survey released today by the National Council on Aging (NCOA) and UnitedHealthcare reveal that a large percentage of baby boomers and seniors ages 65 and over do not understand Medicare and are unaware of important recent or impending changes to the program.
The study results reinforce the need for more education regarding the nation's largest health insurance program. The need for greater understanding of Medicare will only grow during the next two decades as tens of millions of people are added to the program. Over the next 20 years, an average of 10,000 boomers a day will turn 65 and become eligible.
UnitedHealthcare and NCOA surveyed 1,000 seniors ages 65 and over and 500 'leading-edge' baby boomers ages 60 to 64 to gauge their understanding of the Medicare program. The survey was conducted as part of an ongoing partnership between the two organizations to help Medicare beneficiaries, their caregivers and baby boomers learn more about their health-care options now and in the years ahead.
People Ages 60 and Over Stumped by Medicare's Structure
More than half of survey respondents find Medicare confusing or do not understand it at all, and most do not understand the program's structure. Only a third correctly identified Part A as helping to cover the costs of hospital care. Less than 25 percent knew that Part B helps cover the costs of a doctor visit, and more than two-thirds did not know what Part C covers. Only 12 percent were aware that Part C helps cover the costs of hospital care, doctor visits and prescription drugs, and even fewer – 7 percent – knew that Part C is synonymous with Medicare Advantage.
The confusion about Medicare is not limited to the program's structure. Nineteen percent of respondents who reported being enrolled in Medicare said they do not know what type of coverage they have.
"Without a solid grasp of the basics of Medicare, older adults are not well-positioned to understand their options and find the coverage that best meets their needs," said Jim Firman, president and CEO, the National Council on Aging. "These findings show that Medicare beneficiaries either are not getting the information they need to understand the program or that the information that's currently available isn't resonating with them. Both scenarios are worrisome today but also of great concern given the significant growth on the horizon for Medicare as boomers age in. Through our partnership with UnitedHealthcare and our education efforts, we hope to help older adults become more knowledgeable, better-informed Medicare consumers."
One Year After Reform, Confusion Persists
The survey results suggest that more than a year after the signing of the Patient Protection and Affordable Care Act, most adults ages 60 and over remain perplexed by the law itself and how it will – or will not – affect their Medicare coverage. Half of survey respondents described their understanding of the law as poor. Only 12 percent said they have an excellent or good understanding of the law.
Awareness of two important changes to Medicare in 2011 as a result of health reform is also low. One of the most significant changes that affects all beneficiaries is the dates of the Annual Enrollment Period (AEP), when people enrolled in Medicare can change their benefit elections. In previous years, the AEP began Nov. 15 and ended Dec. 31. Beginning this year, it starts a month earlier, on Oct. 15, and ends Dec. 7. Only 9 percent of survey respondents were able to identify the new start date, with even fewer respondents (3 percent) correctly identifying the new enrollment deadline. The majority (63 percent) believe beneficiaries continue to have until Dec. 31 to make an enrollment decision.
Respondents are similarly unaware of new cost-savings opportunities in the Part D prescription drug coverage gap, or 'donut hole.' The health reform law is gradually closing the coverage gap, beginning in 2011 with 50-percent discounts on brand-name drugs and 7-percent discounts on generic drugs for beneficiaries who fall into the coverage gap. Less than half of respondents (47 percent) were familiar with the coverage gap, and of those, more than two-thirds were unaware of the new discounts.
Medicare Confusion Could be Costing Seniors in the Form of Missed Opportunities to Save Money
More than a third of respondents ages 65 and over who are enrolled in Medicare are spending $1,000 or more out of pocket each year on their health-care costs. The survey found that a significant portion of respondents (29 percent) are worried about their ability to pay out-of-pocket health-care costs, yet most who are enrolled in Medicare are not taking steps to save money on their coverage.
Although the majority of respondents (58 percent) described their ability to evaluate and choose the best Medicare coverage to meet their health and financial needs as excellent or good, nearly half reported that they have never shopped around to find the best coverage for them. About another 25 percent of respondents have not shopped in two or more years.
Nearly 60 percent of respondents who have never shopped or have not shopped in a few years cited satisfaction with their current coverage as their primary reason; however, 41 percent of all respondents ages 65 and over said they do not think they would save any money by shopping around for different Medicare coverage.
The survey also found that the majority of potentially eligible Medicare beneficiaries are not taking advantage of important programs that could help them better afford their health care. Of the 36 percent of respondents ages 65 and over who would qualify for assistance with their Medicare costs based on their income, more than two thirds (68 percent) had never heard of the Medicare Savings Programs, which help people with limited income pay some or all of their premiums, deductibles and coinsurance. More than half (53 percent) had never heard of the Extra Help program for prescription drug costs. Even fewer – only 13 percent – had ever applied for either program, despite their eligibility. When asked why they had not applied, nearly 25 percent of respondents reported that they did not know these programs are available.
"In this economy, many seniors are justifiably worried about their financial future," said Firman. "When it comes to Medicare costs, now is the time they can do something about it. Medicare beneficiaries should research their options and apply for available extra benefits. They may be surprised how much money they can actually save."
Boomers Uncertain about Medicare’s Future, Indifferent about Enrolling
In many cases, the people helping current Medicare beneficiaries review plans and find cost savings are their children – many of whom are baby boomers who will be entering the program themselves in a matter of years. But older baby boomers also lack a solid understanding of the program, the survey found. More than half of the boomers surveyed (55 percent) described their understanding of how to evaluate and choose the best Medicare coverage to meet a loved one’s health and financial needs as 'poor.' About three in 10 Medicare beneficiaries surveyed indicated that they rely on help from relatives when making their Medicare decisions, with this help sometimes coming from a son or daughter (19 percent).
Even as many are on the verge of Medicare eligibility, boomers expressed uncertainty about the program's future, with 24 percent saying they expect Medicare will continue as it is for some of their retirement, with major changes in the long term, and 57 percent reporting they do not know what the future holds for Medicare. Only 13 percent expect minor changes in the long term, and 5 percent believe Medicare will exist as it does today throughout their retirement years.
Boomers also expressed mixed emotions about enrolling in Medicare – just over a quarter of respondents reported feeling nervous (26 percent) or indifferent (27 percent), and 14 percent described themselves as overwhelmed. Of those who reported feeling nervous or overwhelmed, the most common cause was the prospect of learning about a whole new health-care system.
"In many ways, boomers have approached each stage of life a bit differently than their parents and grandparents did, and we expect them to do the same as they enroll in Medicare," said Tom Paul, CEO of UnitedHealthcare Medicare & Retirement. "While boomers' trepidation about joining the program is understandable, we believe some of the characteristics that define this generation will serve them well as they become Medicare beneficiaries. For example, they're known for being more sophisticated and discerning shoppers. Boomers should put those shopping skills to use as they evaluate their Medicare options to find coverage that meets their needs."
NCOA, UnitedHealthcare Join Forces to Help Beneficiaries Make Sense of Medicare
UnitedHealthcare and NCOA are leveraging their partnership to help simplify the often complex nature of becoming a Medicare beneficiary. Both organizations believe that a well-informed Medicare beneficiary will live healthier, make sounder coverage choices and save money. UnitedHealthcare and NCOA are hosting a series of educational meetings at senior and community centers across the country and distributing public service announcements for TV and radio stations nationwide to raise awareness of resources to help boomers and beneficiaries learn more about Medicare. UnitedHealthcare and NCOA are also participating in a panel discussion today in Washington, D.C., to discuss these survey findings and their implications for Medicare education.
Complete survey results and more information about the partnership between UnitedHealthcare and NCOA can be found at www.NCOA.org/Medicare.
Decode the Workplace Communication Differences
Between the Sexes
From hunters and gatherers to Venus and Mars, the sexes are, well, simply different
by Jean Kelley
Ms. Kelley is president and founder of Jean Kelley Leadership Consulting and Jean Kelley Leadership Alliance. She works with corporate leaders all over the world to achieve their highest potential. With her Alliance, Jean has helped more than 500,000 businesspeople enhance their careers. She is the author of 'Dear Jean: What They Don't Teach You at the Water Cooler," and "Get A Job; Keep A Job". Visit www.jeankelley.com.
If you're a woman, you may sometimes wonder how your male colleagues can get into a heated discussion during a business meeting, end the meeting with issue unresolved, yet walk out of the room as the best of friends. And if you're a man, you may get frustrated when talking with your female co-workers about one topic, and they bring fourteen more topics into the conversation - all of which seem totally unrelated.
We all know that men and women think and act differently, both at work and at home, but knowing there are differences between people is only half the battle. To have successful working relationships with members of the opposite sex, you also have to know why those differences matter and what to do about them. The good news is that with a little insight into men and women, you can overcome the apparent communication and behavioral challenges that plague any workplace and gain greater understanding of each other.
Once Upon a Time
Before we can look forward to a harmonious future, we need to begin by looking back into human evolution. Once upon a time about a million years ago, communities consisted of hunters (men) and gatherers (women). The hunters left every morning and tried to hunt food for the community. The gatherers stayed home and gathered the nuts and berries and made preparations for the food the men would bring back. So as far back as scientists can tell, women and men had different roles, and as a result, their brains developed in different ways.
For example, a man's brain goes in and out of a rest state all day. Millions of years ago when men sat in trees waiting for their prey, they had to be quiet and disengaged. They didn't want to scare away their potential dinner. So their brain evolved to learn to engage, disengage, engage, disengage throughout the day.
Women, on the other hand, couldn't do that. They had to be on high alert all day, protecting themselves and their children as they gathered necessities and tended to the community's needs. Their brains evolved to be always active.
In fact, if you look at an fMRI (functional MRI) of a man's brain at rest and a woman's brain at rest, you'll see that the woman's brain is busy and firing everywhere, whereas the man's brain is quiet. This is not to say that one gender is better than the other; it's simply an illustration of one of the many differences between men and women and how it evolved.
So what else is different from a brain wiring perspective? Here are a few highlights:
- Brain chemicals. Men produce more testosterone, and women produce more oxytocin. Testosterone is an aggressive chemical, and oxytocin is a 'tend and befriend' kind of chemical. These chemicals are significant drivers in a person's brain.
- Cycles. While women have a 28 day cycle, men have a cycle every day. Their testosterone spikes in the morning when they wake up (so they can go out and hunt), wanes in the afternoon, and spikes again in the evening around 8 p.m. It then goes back down, only to repeat the cycle the next day.
- Brain matter. Men have more gray matter, while women have more white matter. The gray matter is used for local processing of thoughts and tasks. The white matter is what connects everything. This is why when a woman is processing an emotional event, she will do so immediately. All the interconnections make processing faster in her mind. A man is processing locally and will do so for a longer time. He doesn't have the same type of factors to draw from.
- Hierarchy. While both men and women understand hierarchy, men really understand it. Whoever brought back the biggest animal from hunt received the most status in the community. So that desire to be 'top dog' and get their point across is innate in men. Likewise, women wanted the security of being with the men who could provide the most food for the family, which is why even today women (no matter what their income level or social status) want to be associated with successful men. It's hardwired.
Of course, there are always exceptions to every rule. Within the spectrum of both male and female brains, there are gradations. There is also something called the 'bridge brain,' which is someone who has characteristics of both the male and female brains.
Why This Matters
Because we're working and communicating with each other every day, knowing the differences in gender communications is vital. Much has already been written about personality, values, and behavioral differences in communication; now it's time to overlap gender differences into the equation.
For example, while women have distinct viewpoints on topics, when they communicate they often try to 'keep the peace.' Men, however, are typically more aggressive in their communications, more argumentative about their ideas, and more vocal about their stand on a certain thing.
Women focus on building consensus. And because they're contextual and they process information in the white matter, they're often trying to reduce the heated arguments. This doesn't mean a woman doesn't like a good argument; however, if it gets hostile and the woman gets stressed, she'll start producing oxytocin, which will prompt her to take steps to calm the situation down.
And because women have so much white matter, they may take a longer time to answer a question because they're filtering it through the article they read this morning or what their boss said two days ago. Think of it like sorting in a computer. They’re doing a huge sort through the entire database to arrive at an answer.
Tips for Better Communication
To ease the daily workplace communication challenges, keep the following points in mind:
For men…
- Keep women's white matter in mind. They are not jumping from topic to topic just to annoy you. In their brain, everything is connected.
- Remember that women 'tend and befriend.' As a result, they have a tendency to use up-talk - where it sounds like they end every sentence with a question mark. Or they say such things as 'What do you think?' This does not mean they don't know what to think. They simply want to gain consensus.
- Women all over the world tend to use more emotionally loaded words when they communicate. So they use high drama phrases and words such as 'always' and 'never' much more often than men do.
For women…
- If you want to talk to a man about something that's critical, and you think he's going to be defensive, don’t do it at the 9 a.m. meeting or after hours at the company dinner. Remember that daily cycle.
- Don't jump from subject to subject, and always condense your thoughts into short sentences. Men have a word limit (this has been scientifically tested), and once they reach their word limit, it's almost like a little blind goes down. They simply can't process any more information.
- Remember that a man's brain shifts into that rest state throughout the day. So when you're talking to him and he's fidgeting, tapping his fingers on the table, or even doodling during the meeting, it doesn't necessarily mean he's bored or not interested. In fact, it probably means just the opposite. He's unconsciously forcing himself to stay alert, keeping his brain active by that movement.
Closing the Great Divide
The key now is to accept this information, embrace it, and impose it as a new structure of thought in your own mind. Become conscious and aware of the differences between the sexes and use it in your daily interactions with others. By doing so, you can ease some of the frustrations you feel when communicating at work and build professional relationships built on understanding, collaboration, and trust
A Decade of Helping Moms Balance:
The Principal Financial Group Recognized by Working Mother
Named to the '100 Best Companies for Working Mothers' list for a tenth time
DES MOINES, Iowa - (BUSINESS WIRE) - For the tenth time, the Principal Financial Group has been honored for paving the way for new moms and families everywhere. The Principal was once again named to the Working Mother 100 Best Companies list.
With more than 169,000 women hired last year, this years 100 Best Companies make up an impressive group of winners who offer family-driven programs and benefits that far outpace their competitors
The Principal was recognized for access to onsite childcare and initiatives offering advancement for women in the company. A strong culture of flexibility and programs supporting work-life balance also greatly contributed to its appearance on the 2011 list.
"It is truly a rewarding honor to be consistently recognized as a flexible, mom-friendly workplace. Our company prides itself on being a leader in offering flexibility and benefits, not only to our working mothers, but to all our employees," said Ralph Eucher, senior vice president, Human Resources at The Principal.
Demonstrating the power of change and their unwavering commitment to parents nationwide, 100 percent of this year's winning companies offer flextime hours, telecommuting, paid maternity leave and employee assistance programs.
"With more than 169,000 women hired last year, this year's 100 Best Companies make up an impressive group of winners who offer family-driven programs and benefits that far outpace their competitors," said Carol Evans, President, Working Mother Media. "This year's winning companies are proof that success lies in the numbers - 97 percent of companies are offering prenatal education, weight-loss, wellness, and stress-reduction programs to employees at every level."
Profiles of the 100 Best Companies, as well as national comparisons, are chronicled in the October issue of Working Mother and at workingmother.com/bestcompanies.
For more news and insights from The Principal, connect with us on Twitter at http://twitter.com/ThePrincipal.
Methodology
Companies were selected for the 2011 Working Mother 100 Best Companies based on an extensive application with more than 650 questions that surveys the usage, availability and tracking of programs, as well as the accountability of managers who oversee them. Seven areas were measured and scored for the 2011 initiative: workforce profile, benefits, women's issues and advancement, child care, flexible work, parental leave and company culture. For this year's 100 Best, particular weight was given to benefits, flexibility and parental leave.
About the Principal Financial Group
The Principal Financial Group (The Principal ) is a retirement and global asset management leader. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, investment services and insurance through its diverse family of financial services companies. A member of the FORTUNE 500, the Principal Financial Group has $335.8 billion in assets under management and serves some 16.5 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.
About Working Mother Media
Working Mother magazine reaches 2.2 million readers and is the only national magazine for career-committed mothers; WorkingMother.com (www.workingmother.com) gives working mothers @home and @work advice, solutions, and ideas. This year marks the 26th anniversary of Working Mother’s signature research initiative, Working Mother 100 Best Companies, and the ninth year of the Best Companies for Multicultural Women.
The Growing Hispanic Market
Is 50 million still a niche?
by Tom Morey
Mr. a 16-year insurance industry veteran, is Aflac's vice president of Product Development. He oversees designs, pricing and execution to include product development, product positioning and corporate bids.
In even the best of economies, successful prospecting and target selling are two fundamentals that undeniably determine the size of your book of business. More than ever, brokers and agents acknowledge the relevance voluntary benefits have in today’s environment, both at the individual and group levels. Starting with a high-growth market such as voluntary benefits is certainly the place to begin. But what about narrowing down prospective markets even further? There is one emerging market that presents major opportunities, if approached correctly.
The Hispanic/Latino population is 50.5 million strong in the U.S., one of the fastest growing in America. In fact, it is growing four times faster than the total population, and is projected to nearly double between 2010 and 2050, according to the U.S. Census Bureau. The Hispanic population is not only sizeable; it has buying power as well.
The segment boasts a purchasing power of more than $1 trillion, and Latino-owned businesses are the fastest growing segment of small businesses.
A Product to Help Penetrate the Hispanic Market
One of the biggest mistakes many brokers and agents make is to fall short in understanding the true needs of minority markets. New research from the 2011 Aflac WorkForces Report1 sheds some light on one area that leaves many Hispanic consumers financially vulnerable - accident coverage.
Most Americans are in denial about the real risks of accidents, and that's also true among the Hispanic population. Only nine percent of Hispanic workers believe it is likely they will experience a car accident, and only seven percent believe they’ll require a long-term hospital stay in the future. However, according to the 2008 National Hospital Ambulatory Medical Care Survey, 28.4 million people visit the emergency department for unintentional injuries or accidents a year; that amounts to 12 percent of the entire U.S. population.
Although the likelihood of experiencing an accident is often disregarded, the financial implications are top of mind. For example, half of all Hispanic workers said the first thing they would think about if they learned they or a family member had an unexpected serious illness or accident was 'how much it would cost.'
This is largely attributed to lack of preparation to pay for medical expenses not covered by insurance. Forty-eight percent of Hispanic workers are admittedly not very/not at all prepared to pay for out-of-pocket expenses not covered by major medical insurance, related to an unexpected serious illness or accident. In fact, nearly one-third (32 percent) would have to use a credit card, 15 percent would borrow from friends/family, and 24 percent would borrow from a 401k.
Market Need for Voluntary Accident Insurance
There is abundant opportunity to help shrink protection gaps among Hispanic workers when it comes to voluntary accident insurance. Of the 24 percent of Hispanic workers whose company even offers accident insurance, only 13 percent are enrolled. Yet the clear majority (67 percent) of Hispanic workers would be at least somewhat likely to apply for voluntary insurance if their employer offered it. This compared to 59 percent of workers overall who stated the same. And accident insurance pays employees cash benefits when unexpected medical and everyday expenses begin to add up after an accident.
As voluntary accident insurance grows in popularity, the market has also evolved to offer more solutions than ever before, making it an ideal sales opportunity for brokers and agents. Providers like Aflac now offer both individual and group accident insurance, making it more appealing to businesses. of all sizes. In addition, Aflac's group accident insurance is guaranteed-issue with no underwriting required to qualify for coverage.2 Accident benefit payments under Aflac’s group plan include fractures, dislocations, medical fees, hospital admission, ambulance rides and physical therapy, among others.
Meet Hispanic Workers’ Expectations When It Comes to Purchasing Insurance
Every culture has distinct characteristics, values and expectations that influence purchasing behavior. The Hispanic culture places familial ties and interaction of high import. For example, the Aflac study found that 64 percent of Hispanic workers say 'I put my family ahead of work' describes them extremely/very well. Therefore, Hispanic insurance consumers expect face-to-face interaction, a lot of personal service, and a trusting relationship.
In fact, 52 percent of Hispanic consumers very strongly/strongly agree with the statement 'I would be more informed about health insurance choices if I sat with an insurance consultant during enrollment.' Providing these workers with a call center number or sending them to cyberspace will simply not work in your favor.
In addition to preferring a more personal sales approach, Hispanic workers are also more interested in insurance options that fit their specific life stage or situation. Nearly three-quarters (73 percent) of Hispanic consumers very strongly/strongly agree with the statement 'I would be more likely to take advantage of a benefits package tailored to my personal situation.'
Conclusion
In a nutshell, brokers and agents who take the time to understand their target market, determine a need exists, and arm themselves with the right products and services will see a healthier book of business. Emerging markets, such as Hispanic consumers and businesses, fit such criteria. As you begin to penetrate the Hispanic marketplace, remember to keep it personal, recognize cultural value of family and friends, and deliver in-person customer service excellence. The result will be a loyal customer base that will refer more business to their close-knit community.
Visit aflacforbrokers.com
To FEE or not to FEE
The question is 'what is your time worth to your clients'?
by Herbert K. Daroff, J.D., CFP
Mr. Daroff is affiliated with Baystate Financial Planning, in Boston. He can be reached at hdaroff@baystatefinancialplanning.com
A doctor and a lawyer were talking together at a cocktail reception when a woman approached the doctor. "Sorry to interrupt, but I've been having this pain in my shoulder. Should I ice it or heat it?" The doctor asked her a few questions and then gave her his advice. The woman thanked him and walked away.
The doctor turned back to the lawyer and said, "Don't you just hate it when people come up to you and ask for advice? What would you do?" The lawyer responded, "I'd send her a bill!"
The next morning when the doctor arrived at his office he found, under his door, a bill from the lawyer.
What is your time worth to your clients?
I was paid $10,000 for writing a 2-page memo. It took me about 5-hours. My client was delighted to pay my fee because I solved his problem. It's the value of the advice. In fact, he told me that he would have paid much more for the creativity and the responsiveness.
A good friend was having a wooden boat built. He visited the workshop on Nantucket to watch the craftsmen. There was an older gentleman also watching. He was sketching his view of the completed vessel. My friend loved it and asked if he could have it. The older gentleman bristled, crumpled up the paper, and threw it in the furnace. "I get paid for my illustrations," he said, "and you just want me to give it to you?" My friend said, but, it only took you 15 minutes." The artist said, "It took me 87 years and 15 minutes!" He wanted to be paid for his experience and expertise, not for his time.
I frequently uses the following examples to illustrate value vs. time:
A man walks into a dermatologist's office scratching feverishly at his arm, which was now bright red. 'I've been to hypnotists, acupuncturists, and other dermatologists. Nobody can help me." The doctor brought him into a room. On the walls were shelving units filled with rows and rows of small drawers. He got up on a ladder, selected a drawer, and removed a tube of cream. He climbed back down and applied the cream to the man's arm. Instantly, the itching stopped. The redness quickly turned to pink. "That's fantastic!" the patient exclaimed, "What do I owe you?" "That'll be $500," said the doctor. "What?" said the patient. "It only took you 15-minutes." "Ok," said the doctor, "you pick a drawer!"
An assembly line plant was not running. Engineers were called in. No one could figure out what to do. Work was backing up. Finally, one engineer arrived. He looked around for about 15-minutes and yelled out, "Anybody got a hammer?" Twenty guys came running. Each one had a hammer in his hand. The engineer grabbed a hammer and gave the side of one machine a solid bang. Instantly, all of the lights came on and all of the conveyors started running. A huge cheer arose. "What do we owe you?," said the foreman. "$1,500," said the engineer. "You've only been here 15-minutes. I want an itemized bill," said the foreman. Here's what the engineer sent:
Engineering Associates, LLC
123 4th Street
Anywhere, USA
INVOICE
Time: 15 minutes @ $150 per hour: $37.50
Value: knowing where to hit: $1,462.50
Total: $1,500.00
What's your hourly rate?
Clients always want to know how much you charge. They never seem to ask what it's going to cost. If I charge $250 an hour and can solve the problem in 2-hours due to my years of experience, then my bill for services rendered will be $500. A less experienced practitioner may charge $150 an hour, but take 5-hours to figure out how to do what I've done many times before. His bill is $750. Yet, all too often, the client chooses the lower billable rate, and the higher cost.
There is clearly a lesson in that. What does it teach us? Either, we should quote lower billable rates and then pad the hours (ok, just kidding), or charge based on the value of your advice. Charge for your value, not for your time. More and more, we are seeing estate planning attorneys quote a flat fee for drafting documents (i.e., wills, trusts, etc.). The client wants to know upfront and not be surprised at the end.
How much should you charge?
An owner and manager of commercial real estate had a 92.3% occupancy rate. When asked, "What would it take to hit 100%?" He said, "I don't ever want to be at 100%. If I am, then my rents are too low!" How many of your clients have balked at your fees? If less than 10%, then maybe you're not charging enough. The owner of a series of car dealerships told me that his father had given him some very sage advice. "He told me to add 85 cents to whatever I thought was my best offer before giving that price to the customer," he said. "You're going to sell lots of cars," his father told him, "that money will add up."
Thirty years later, he estimated he had about $2.5 million from the 85 cents per car (which he increased a bit over time) that was invested in a separate account to keep score. How many clients will you lose by charging them $2,600 instead of $2,500?
Should you charge by the project, or establish retainers?
I hate to charge by the hour. I hate to keep time-sheets and my clients resent getting a bill every time they call an advisor and ask a question. I think that charging by the hour discourages communications and I like my clients to call me and tell me that they saw an article or heard about an idea. I try to call them whenever I learn about a new technique that can be applied to their situation.
I charge by the project, but I tell my clients to treat it as a retainer. "Consider this a retainer for the rest of the year. Feel free to call or email whenever you have a question without the fear of getting a bill from me." Does your charging methodology make sense to your clients?
Assets Under Management (AUM)
A fee of 1% for assets under management results in:
$10,000 for a portfolio of $1,000,000; and $20,000 for a portfolio of $2,000,000. Why? Is twice as much advice being provided? Are there twice as many holdings in the larger portfolio?
Some Third Party Administrators (TPAs) of qualified retirement plans charge a flat fee for each plan (regardless of the amount of assets) and then charge a smaller fixed fee for each participant. Could those who charge for assets under management adopt a flat fee and then a fixed dollar amount for each holding? Of course, they could. If the $1,000,000 and the $2,000,000 accounts have the same number of holdings, then both clients would be charged the same fee.
Estate Administration
The same is true of probating an estate. Many practitioners charge a fee based on a percentage of the assets in the estate. The larger the estate, the higher the fee. Yet, a $10,000,000 estate that is made up of one house and a portfolio of municipal bonds is much easier than an estate of $3,000,000 with nine separate real estate holdings and a privately held business.
The fee for the probate process could be a flat charge plus a charge for the number of holdings. Or, it could be an estimate of the time required stated as a flat fee for the project. Or, it could be an hourly fee. Should you charge at all? To FEE or not to FEE?
Fees vs. Commissions
With all of the bashing of commission sales people, by the media and by other financial planning practitioners, I'd like to share two very magnanimous gestures:
1. The mother of an existing client was dying. Her doctors told her that she had 3 to 6 months to live. She had an estate of $2,500,000, which is $500,000 higher than the $2,000,000 death tax exemption amount in 2006. At no cost, what we call value-added, we arranged for a series of $12,000 gifts using her annual gift exclusions to her 4 children, their spouses, and her 10 grandchildren:
18 x $12,000 = $216,000
No big deal for us, but that saved the family $100,000 in estate taxes when she died. We did it free. What could we have charged for this advice? What would other advisors have charged? What was the value of the advice? This one reminds me of the mortgage broker whose radio advertisements as interest rates continued to decline talked about his firm not charging any closing fees. "We make enough from the loan. We don't need to make more off of each closing. As a result, every time rates go down, refinance with us. We have clients who have refinanced 6 times and never paid us a dime."
Commissioned sales people work on a contingency. They may provide a great deal of valuable information and become an 'unpaid consultant' if the prospective new client doesn’t buy, or doesn't buy from them. Is a 'contingent fee' the same as a commission? If a lawyer takes a case on a contingency, his or her income is a percentage of what the client receives. The lawyer gets paid only if the client wins. Is that a commission? A business broker may provide valuations and financing assistance, in exchange for a percentage of the purchase price. The broker only gets paid if the deal closes. Is that a commission?
2. Parents of an existing client own a beautiful ocean front house that they want to leave for their 4 children and 10 grandchildren to enjoy. They are concerned that not all of them can afford their share of the taxes, insurance, utilities, maintenance, etc. We suggested funding an irrevocable Dynasty Trust with a life insurance policy (in this case, second-to-die, or survivorship coverage). The trust would fund the projected expenses. They loved the idea. We provided the 'architectural' designs for a Governance Agreement to minimize the squabbles over who gets to use the house and when they get to use it. This is similar in nature to Governance Agreements used in family businesses.
We designed a Qualified Personal Residence Trust (QPRT) so that the house could be gifted with a significant discount to the same Dynasty Trust. We provided these services free. We felt that we were adequately paid from the sale of the life insurance policy. We worked with their attorney who drafted the Dynasty Trust, the QPRT, and the Governance Agreements. We could have charged for our advice. We chose not to. This was 'value-added' for our client.
What's best for you and your clients?
I have frequently described my compensation arrangement based on a three-part process: The initial meeting is on my nickel. It may take several meetings for both of us to fully understand each other's expectations. The three-part process and my compensation begin only after we have mutually defined the scope of our engagement.
First, I will gather a great deal of both objective and subjective information about you, your family, and your business. Where are you now? What do you own? How is it titled? Where would you like to be in the future? What are your goals, needs, values, and priorities? Then, I will analyze that data and evaluate alternative solutions that are appropriate for your situation. For that, I charge a fee based on my estimation of the time involved and the complexity.
Second, you and I working together with your team of existing advisors will determine which solutions will be implemented. The implementation usually involves financial products (i.e., insurance and investments). If as a result of my analysis or any offshoot of my analysis you make any changes in existing products or purchase new ones, then I ask for a promise that you will place those products through me. My promise is that I will shop the marketplace for the best products and the best prices for you. For this, I will receive market commissions.
Third, in order to keep your financial plan current, we will need to continually monitor it and update it based on changes in the tax laws, the economy, and your personal and/or business situation. For this, I charge an annual renewal-servicing fee and ask you to refer me to other successful people like you who are care about their families and their businesses.
When my financial planning clients ask him, "How do you get paid?" I usually answer, "It's up to you." Then, I describe hourly billing, project fees, assets under management, commissions, retainers, etc. and let them choose. My clients don't care how I get paid. They only care that I am sincerely interested in helping them and that I have the expertise and creativity to do so. There's a wonderful old adage that says, "Clients don't care how much you know, until they know how much you care."
I describe the ideal client as a successful business owner, professional, or executive who is a decision-maker and cares about the people who depend on him or her for their financial support.
Best Companies Remain Calm and Help Employees Carry On
Announcing The Principal 10 Best Companies for Employee Financial Security - 2011
DES MOINES, Iowa - In this rocky economic recovery, ten growing businesses have provided stability to their employees with a commitment to benefits that brings both financial security and physical well-being.
These 10 organizations have been selected by an independent panel of judges for national acclaim as The Principal 10 Best Companies for Employee Financial Security – 2011.
They are:
- Associates for International Research, (AIRINC), Cambridge, Mass.; global mobility consultant
- Consolidated Federal Credit Union, Portland, Ore.; credit union
- Educational Commission for Foreign Medical Graduates, Philadelphia, Pa.; medical education testing
- Greeley and Hansen, Chicago, Ill.; environmental civil engineering
- Home Builders Institute, Washington, D.C.; construction education association
- Postal Credit Union, Woodbury, Minn.; credit union
- RED F Marketing, Charlotte, N.C.; advertising agency
- Veridian Credit Union, Waterloo, Iowa; credit union
- Water Environment Federation, Alexandria, Va.; technical educational organization
- Western National Mutual Insurance Company, Edina, Minn.; property and casualty insurance
"These winning companies are taking a comprehensive approach to workplace benefits in order to reduce financial and physical stress of employees at all levels and demographics," said Dallas Salisbury, Principal 10 Best judge and president and CEO, Employee Benefit Research Institute.
"Taking care of employees is good for business
but these companies believe it is also the right thing to do."
"The Principal 10 Best Companies understand the direct connection between well-rounded benefits, a healthier, happier workforce and a better bottom line. That's what sets them apart from other companies in both the best and worst economic times," said Luke Vandermillen, vice president at the Principal Financial Group. "These winners prove that when companies help their best and brightest with their financial dreams, they win too."
The Principal 10 Best Companies reap the rewards of strong benefits with turnover rates that are significantly lower than others in their industries. The winners' average annual voluntary turnover rate is 9.3 percent compared to the national average of 21.2 percent.
This is the tenth consecutive year The Principal has sponsored the program. It honors growing companies (five – 1,000 employees) for their commitment to employees' financial security through outstanding benefits. The 2011 winning companies range from 39 to 829 employees. Profiles of the winners are available at www.principal.com/10best.
10 years of employee financial security: the right thing to do
The program mirrors the changing benefits landscape across America: over of the past decade the best companies have adapted their benefits offerings to meet changing employee needs. According to some of the longest standing judges of The Principal 10 Best program, trends among this year's winners exemplify three major transformations that have taken place over the last decade:
A shift from do-it-for-them to do-it-with-them
As benefit programs have shifted from the employer making most decisions to employees facing more choices and personal financial responsibility, The Principal 10 Best Companies continue to share significantly in the cost. They engage employees through collaboration and strong education to help them make the best use of their benefit dollars.
From cookie cutter to customized
The last decade witnessed a significant trend toward customized benefit programs tailored to specific employee needs and demographics. The Principal 10 Best Companies actively engage employees in helping to shape benefit programs.
Security is financial and physical
Judges say the biggest change of the decade is the significant expansion of wellness programs. The Principal 10 Best Companies use a holistic approach to financial security with an increase focus on wellness as a way to lower healthcare costs for both the company and the employee.
"While we've certainly seen an evolution in benefits over the last ten years, what hasn't changed is the winners' commitment to the people who made them successful," adds David Wray, Principal 10 Best judge and president, Profit Sharing/401k Council of America. "Taking care of employees is good for business but these companies believe it is also the right thing to do."
Learn more about The Principal 10 Best Companies for Employee Financial Security at www.principal.com/10best
Guardian announces 2011 'Girls Going Places'
Encouraging entrepreneurship for 11 years
Prizes Totaling $30,000 Awarded to Teen Entrepreneurs
NEW YORK, NY (8/29/11) - The Guardian Life Insurance Company of America (Guardian) announced Friday the winners of its 2011 Girls Going Places Entrepreneurship Award Program, a national competition that recognizes teen-aged girls, 12 to 18, who demonstrate exceptional entrepreneurship and community service. This year's award marks Girls Going Places 11th anniversary and demonstrates Guardian's commitment to small business owners and entrepreneurship.
"Since we launched Girls Going Places, more than 150 young female entrepreneurs have been awarded more than $300,000. In a time when the economy faces continuing challenges, it is inspiring to see so many budding young entrepreneurs looking to prepare for the future, embrace their dreams, and find success," comments Kathy Readinger, national manager, Girls Going Places Program, Guardian. "We salute the 2011 winners and all the girls who have utilized our program to reach financial independence and move forward on the path to business ownership."
This year's 15 winners from 11 states represent a wide range of business interests from scholarship counseling, to computer services, tutoring, a lemonade stand, and jewelry and apparel design.
The top 2011 winner is Meredith Charlson, 16, of San Mateo, CA. Meredith owns City Servers, a company that provides set up, service and clean up for events ranging from small dinner parties to wedding receptions. Meredith was inspired to start her business after she saw her sister, a caterer, having to decline work because the request was for service only at events. At the age of 14, Meredith acquired a food safety manager's license from the state of California. She has worked at hundreds of events and personally trained 20 teenagers to work for her company as servers.
"If you have an idea for a good or service that is in demand, just go for it," first-place winner Meredith Charlson advises other teens. "Mistakes are a part of the learning experience. You don't have to go into it knowing what you're doing. With the help of a mentor to guide you through the basics, entrepreneurship is possible for anyone."
Second place winner Shannon McNamara, 18, of Basking Ridge, NJ, founded SHARE (Shannon's After-school Reading Exchange), a non-profit organization to empower girls in Africa when she was 15 years old. This summer was the fourth she spent doing field work for SHARE in Tanzania. Her efforts created four school libraries with more than 23,000 books and thousands of school supplies. The libraries are used by 3,200 African students and 45 teachers. Shannon has recruited 850 students during the past three years to volunteer thousands of hours organizing fundraising events (to pay for shipping costs) and managing book drives.
Third place winner is Taylor Davis, 14, of Miami, FL, who created The Traveling Canvas program to provide art supplies for Miami-area schools and conduct art classes for homeless children ages 6 to 12 six times a year. She founded The Traveling Canvas in 2009 when her school faced cuts in its arts budget. She wrote personal letters to the presidents of 50 art supply companies in the United States, Canada, and Europe asking for assistance, who responded with $32,500 in supplies, which provided for 150 students. She now also hosts three-hour art classes at a local homeless shelter every six weeks.
Guardian granted the fifteen winners and finalists a total of $30,000, which they can use to reinvest in their entrepreneurial projects or to save for college. The first, second and third place winners receive prizes of $10,000, $5,000 and $3,000, respectively.
The 12 finalists are granted prizes of $1,000 each and include the following young women from 11 states:
Sonia Kumar - Edison, NJ
Belma Ahmetovic - Wethersfield, CT
Mary Claire McGlynn - Belleville, IL
Caroline Bell - Pittstown, NJ
Deneisha Wagner - Hampton, VA
Aleena Byrne - San Diego, CA
Skyler Alcala - San Antonio, TX
Elizabeth Sassman - Visalia, CA
Ayanna McFarland - Memphis, TN
Anikae Brown - North Little Rock, AR
Stacey Ferreira - Scottsdale, AZ
Jenna Welsh - Gettysburg, PA
For more information about the program, its awards and conferences, please visit www.GirlsGoingPlaces.com. Information is also available on MySpace, Facebook and YouTube; keyword Girls Going Places.
About Guardian
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America and its subsidiaries are committed to protecting individuals, business owners and their employees with life, long term care insurance, disability income, group medical and dental insurance products, and offer 401(k), annuities and other financial products. Guardian operates one of the largest dental networks in the United States, and protects more than six million employees and their families at 120,000 companies. The company has more than 5,400 employees in the United States and a network of over 3,000 financial representatives in more than 80 agencies nationwide.
For more information about Guardian, please visit: www.GuardianLife.com
Innovations
HealthPlan Services Releases RebateLink
To Ease Compliance with MLR Mandates, Rebate Requirements
TAMPA, Fla. - Aug. 16, 2011 - HealthPlan Services (HPS), the nation's leading technology and administrative services provider for the insurance and managed care markets, announced today the launch of RebateLink, a flexible processing solution that reduces costs associated with medical loss ratio (MLR) rebates.
"Managing the MLR and administering rebates requires substantial resources and sophisticated systems that many carriers simply do not have," said Jeff Bak, president and CEO, HPS. "RebateLink provides the tools carriers need to comply with MLR mandates and manage the processing and distribution of rebates in a timely, cost-efficient manner."
RebateLink reduces administrative costs, improves compliance and mitigates the risk of civil penalties by providing the infrastructure necessary to efficiently comply with MLR mandates.
RebateLink provides a full range of flexible processing solutions, including:- Monitoring and integration of the latest MLR policy requirements
- Multiple entry and exit interface points, which provide flexibility for standalone modules
- Gather and store missing employer data
- Calculate rebate
- Create statements and disbursements
- Electronic and paper statement options, as well as multiple disbursement methods, including paper checks, automated clearing house (ACH) credits and premium credits
- Escheatment processing
- Audit support
"By taking advantage of the unique marketing opportunities presented by the rebate process, RebateLink can also turn a profit drain into a revenue gain," said Bak. "The experts at HPS work with carriers to leverage the data collected by RebateLink to improve cross-selling and design tailored retention strategies, and to provide comprehensive member support services."
RebateLink is part of the LinksSM Suite of Services, a set of solutions designed to address the operational needs of individual, small group, voluntary and association plan providers. The Links Suite of Services leverages HPS' more than 40 years of experience providing administrative solutions that lead to profitable growth, operational efficiency and savings, and speed to market. It achieves those results with scalable, business-driven technology platforms, industry-leading billing aggregation and financial systems, alternate and traditional distribution networks and analytics-based retention programs.
For more information on Links, call (877) 300-9488 or email Links@healthplan.com.
Planned Giving For The Middle-Market
When charitable giving enters the retirement planning conversation, it takes on the role of leaving a legacy
by Chris Campbell
Mr. Campbell is vice president of strategic marketing and business development for Bankers Life and Casualty Company, the national life and health insurer that focuses on the retirement market. He can be reached at c.campbell@banklife.com
The economic downturn and recession resulted in three financially lean years for charitable institutions in the U.S. However, the Giving USA Foundation's annual survey released this past June has good news to share: charitable giving rose nearly four percent in 2010 after declining steadily since 2007. Donations may have not yet returned to pre-recession levels, but Americans' commitment to charity is still impressive: contributions in 2010 were an estimated $290 billion. Individuals donated three-fourths of that amount ($211 billion).
Philanthropy as Legacy
Advisors addressing middle-income clients with retirement strategy should consider the main components of retirement financial security:
- Health: how to pay for care and guard against unexpected medical expenses
- Savings: how to create a lasting retirement income and reduce tax exposure
- Legacy: how to be remembered and provide for loved ones
When charitable giving enters the retirement planning conversation, it takes on the role of leaving a legacy. A planned gift carries greater significance than simply writing a donation check; it is how the giver intends to be remembered after they pass away.
Living individuals are the largest source of revenue for non-profits. However, bequests accounted for $22 billion in charitable giving in 2010. In 2009, the IRS reported that one in five estates claimed a charitable deduction, according to Giving USA.
Middle-Income Giving
So who is donating these billions of dollars? Surprisingly, it is not driven solely by the affluent. Giving USA reported that only around half (53 percent) of individual givers have household incomes over $200,000.
These findings may appear counterintuitive. The common assumption would be people with lower incomes would have less to give away. But philanthropy has strong roots in American society and people of all income levels have important ties to their religious institutions, communities and beloved causes.
The giving landscape changes slightly when looking specifically at planned giving versus individual contributions. LIMRA found that 32 percent of affluent households include charitable giving as part of a financial plan; whereas only 14 percent of middle market households said that a charitable bequest was important to them.
Taking into account the size of the middle market (estimated at over 52 million households by LIMRA in 2009), the fact that one in seven households has interest in planned giving should not be discounted by the industry or by advisors. Definitions of the middle market vary, but annual household incomes of $25,000 to $100,000 are generally considered middle-income.
A recent study from the Bankers Life and Casualty Company Center for a Secure Retirement asked middle-income retirees and pre-retirees their reasons for first consulting a professional advisor. Legacy issues and planning for others, although secondary to the immediacy of retirement saving and income needs, were still important drivers for the middle market to seek out professional retirement advice, even though these clients' assets may be considered limited compared to people in higher-income brackets.
From what we know about the giving habits of Americans, people of all income levels engage in philanthropic giving, so it pays to acknowledge that clients do not need $1 million to be interested in and benefit from products and services that can facilitate planned giving as part of an overall retirement strategy.
The Case for Life Insurance
Life insurance is well-suited to the middle market as a vehicle for planned giving. It is commonly approached in two ways: the client names the charity as the insurance policy beneficiary; or he or she gifts the policy to the charity, which irrevocably transfers ownership of the policy outright to the non-profit. The second is a more complex approach and should be vetted with the charity before assignment to ensure they accept this type of arrangement.
The upside of either scenario is that the charity receives the policy's death benefit as cash without the delay of probate and, in most cases, the estate will receive a charitable estate tax deduction.
Single premium whole life insurance products are one avenue advisors should consider when working with middle-income clients. These products, with their simplicity and low-risk growth, can significantly increase the amount of a client's charitable gift.
The death benefit of the insurance policy will be larger than the premium paid, so immediately the insurance contract increases the amount of money the charity will receive compared to the client willing the sum. This is critical for less affluent givers with limited financial resources. Furthermore, the growth is achieved for the client and charity with lower risk than the alternatives, such as investing funds directly into the stock market.
The single premium whole life policies also have the simplicity of a one-time premium payment. Retirees, more so than younger clients, are apt to receive a lump sum of money after the loss of a spouse, a maturing CD or other account that can be transitioned easily into a single premium whole life policy.
Policies with minimum lump-sum premium amounts under $10,000 broaden the range of client incomes that can be considered good prospects for planned giving and legacy maximization through life insurance. Some insurers even offer whole life insurance with single premiums as low as the $2,000 to $3,000 range.
Reaching Out to the Middle Market
Once in the household, LIMRA says that agents and brokers rarely talk to clients about using life insurance for charitable giving. The affluence of the client did not influence this trend.
Sales representatives discussed life insurance for planned giving in only three percent of households with investable assets of between $25,000 and $99,000 and in only three percent of households with investable assets between $100,000 and $499,000. This percentage increased in households with assets over $500,000, but to a mere seven percent of client conversations.
Advisors may want to proactively ask middle market clients about their intentions and interest in planned giving. However, they need to be more proactive in their outreach to middle-income retirees and pre-retirees in general.
The Middle-Income Retirement Preparedness Study released by the Bankers Life and Casualty Company Center for a Secure Retirement found that the majority of middle-income Americans (54 percent) do not receive professional retirement advice of any kind and most had not been contacted by a professional advisor in the past 12 months (51 percent). The study also uncovered that almost all (84 percent) middle-income clients that currently work with a retirement professional had to contact their advisor first, not the other way around.
Financial firms, banks and insurers actively court wealthy consumers to provide them with financial management and retirement planning advice. Our country's middle-income retirees are underserved and in need of the products and services that retirement professionals can offer to help preserve their retirement financial security and create a lasting legacy.
Divorce Mediation
Today, a comprehensive financial plan must consider the possibility of divorce. While mediation
seeks to avoid costly, damaging litigation, it might also save a retirement plan from disintegration
by Dawn Colsia, JD, PhD; Mark Holland, CPA; Martin Murphy, JD
Ms. Colsia is affiliated with Alternative Resolution Advisors, Newton, Ma. She can be reached at drdawn@ alternativeresolutionadvisors.com. Mr. Holland is president of Wellesley Financial Advisors, LLC, Newton, Ma. He can be reached at marty@martinmurphyatlaw.com; Mr. Murphy is a principal with the Law Office of Martin Murphy. He can be reached at marty@martinmurphyatlaw.com
Part II of a two part series on the process of divorce mediation as an alternative to the conventional adversarial approach. The editors of LIFE&Health Advisor present this collaborativbe essay as an adjunct to the careful construction and planned preservation of estate and retirement income plans.
How To Benefit From Consulting on Mediation
Attorneys are trained to zealously advocate for their clients. Unfortunately, attorneys who are not trained in the benefits of mediation are often unable to accept that the process itself can have as much impact on the client as the outcome. Mediation friendly attorneys understand the benefits of an agreement that is intentionally pursued as opposed to an agreement reached on the courthouse steps with parties who are emotionally and financially fatigued.
More importantly, mediation friendly attorneys recognize that mediation can greatly reduce the collateral damage done to the children, family members and the professions or businesses of the parties. When selecting an attorney to work with while participating in mediation, be sure to inquire as to their opinion and approach to this non-adversarial process.
Mediation is a voluntary process, which means that the parties reserve their right to seek relief from the courts through litigation in the rare case that the mediation is unsuccessful. Participants in family law mediation typically do not have their attorneys participate directly in the mediation sessions. Instead, the parties will meet with their attorney at the outset and end of the mediation. In addition the attorney would be available at any time during the process to discuss the legal issues at hand and the criteria that should be applied.
Areas for discussion may typically include:
Parenting Plan
When a judge considers a proposed parenting plan by the parties they will apply the standard of what will promote the 'child's best interest'. Judges have broad discretion in these matters. A variety of factors may be considered by a judge when formulating decisions regarding custody including the age, sex and developmental stage of the child, each parent's home environment, who has been the primary caregiver and the judge's own observations of the parents.
Child Support
An attorney can help the party understand how the Child Support Guidelines apply to their family. Your attorney and your financial professional can help you understand the tax implications of child support and the potential relationship with an order for alimony.
Division of Marital Assets
Massachusetts General Law c. 208, section 34 lists the mandatory and discretionary criteria the court uses in considering how to craft an equitable division of the marital assets. If the parties to mediation develop a proposed division of assets, the court will most likely approve it so long as the court finds it fair and reasonable.
Alimony
The overriding goal when considering the award of alimony is to attempt to maintain a standard of living comparable to the one enjoyed during the marriage. An Attorney can help the client by applying some of the non-statutory formulas used to make a determination as to what level of alimony, if any, may be accepted by the court. At the time of this article, there is momentum in Massachusetts for alimony reform. For years, many have felt the current system to be unpredictable and inconsistent. The current reform proposals seek to increase the consistency of application of the law.
While an attorney can be helpful during the mediation process, the greatest value may be towards the end when the mediator prepares a proposed separation agreement. The goal of the mediator is to memorialize the intent of the parties with regards to the interests they discussed. However, there are times when an agreed upon interest may have unexpected consequences. The attorney can make his client aware of some of these pitfalls. The client can then return to the mediation to resolve that issue and proceed with finalizing the documents.
Case Example
A client who was participating in mediation presented a draft separation agreement that had been agreed to in principal by the parties. While the agreement on its face appeared to memorialize the intent of the parties, there were a number of sections that needed additional detail. The spouse remaining in the home would be responsible for the first $1,000 of costs for a capital improvement or repair. The attorney expressed concern that with the age of the house it was possible to have several major capital improvements over the course of one year. The client immediately realized that the potential additional costs were well more than what had been intended during the mediation. The parties agreed to language that protected the client from the financial impact of multiple repairs in one year.
Attorneys Help the Mediation Process Succeed
In addition to the Separation Agreement, there are many other documents that may need to be filed with the court. If the parties are using a mediator who is an attorney, they may draft some of these documents for their mediation clients. If however, the mediator is not an attorney, the party will most likely need some assistance in preparing these documents for filing with the court.
Mediation friendly attorneys can provide numerous benefits to their clients while they are involved in divorce mediation. Identification of the pertinent legal issues, education as to the legal standards, and experienced document review, can all be provided in a convenient and cost effective manner. While advocating for their client, mediation friendly attorneys can work with the other neutral professionals in this non-adversarial process to best assist the client during this important period of transition.
Summary of Best Practices
Mediation offers several benefits over engaging in an expensive and protracted litigation process. Most importantly, mediation offers the possibility of preserving a workable and respectful relationship with others involved. Furthermore, the cost savings with mediation can be substantial. During mediation, the bulk of the time is spent negotiating an agreement to resolve all outstanding issues. If the parties utilize one mediator to negotiate the agreement, each consults with their own attorney as needed, and they together utilize one financial neutral to bring transparency to identify all financial assets, the cost savings can be substantial.
When parties utilize mediation instead of litigation it is important to ensure that each party understands their individual legal rights and that each party is fully aware of all financial implications of the divorce. Each person arrives at the divorce process with different levels of expertise with regard to knowledge about the law, the details of assets and liabilities and their knowledge regarding the needs of the children. Best practices, as discussed in this article, permit each party to gain more knowledge of all relevant areas.
The financial neutral's mandate is to represent both spouses' interests equally and to make sure that they understand all the financial issues involved through every step of the mediation process.
The use of a financial neutral helps the parties to accurately identify all assets, liabilities, investments, and employee benefits so that a fair and reasonable settlement can be reached. When both parties consult their own financial expert the process often becomes adversarial and a true value of all assets and liabilities can be difficult to ascertain. In contrast, when the parties together consult a financial neutral, the financial expert can provide a fair evaluation of the parties' financial situation.
During the mediation process it is recommended that each party consult his or her own attorney. It is important that each party have their own counsel so that they are aware of their rights and responsibilities under the law. Consultation with an attorney in this way is much less expensive than utilizing an attorney for the entire process. The parties can then request that one of the attorneys submit the required legal document to court or they can proceed on their own. The most important aspect of mediation is that it enables the parties to engage in a thoughtful process where everyone's needs are considered and it fosters hope for a future workable relationship.
From Raymond James Small Business Dimensions newsletter
Transitioning the family business: In peace or in pieces?
Finding a succession plan that offers the best chance to succeed
Should someone get a bigger slice of blueberry pie for dessert if he picked, sorted and washed the berries for his mother while his siblings watched TV?
If a family bases decisions on equality, each sibling receives an equal share of pie. But if equity is the standard- shares based on proportion of input- whoever does the most work receives a larger piece. And if decisions are based on perceived need, perhaps a brother didn't eat lunch and is ravenous, he receives an extra slice of pie.
Even among closely knit families, these simple scenarios over dessert can sow seeds of discord because people have their own perceptions of fairness. Equal slices of pie, or a business, might seem fair to everyone but the major contributor. An equitable distribution might seem fair to the contributor but quite unjust to everyone else for any reason, sensible or not. And distribution according to perceived need may be most disruptive of all; suppose the hungry child willfully skipped lunch?
Planning ahead
Fast-forward 40 or 50 years. Same family members, all grown. Some outspoken, others less so but hardly disinterested, and all wondering how fair you’re planning to be as you decide on a succession plan for the family business.
No matter how difficult it is to arrive at a workable plan, it seems wise to give it your best effort. Only 30% of family-run companies succeed into the second generation; only 15% make it into the third. Those are discouraging numbers, and most business experts lay the blame at the lack of a workable, orderly and transparent succession plan.
In general, widely accepted criteria apply. Small business owners should have a succession plan, no matter how old they are. While it's not routine, neither is it impossible for a perfectly healthy middle-aged person to suddenly become ill, suffer injuries in an accident or otherwise be taken away from the business.
Many experts agree that between ages 55 and 65, owners should devise a three-, five- or 10-year succession plan and actively explain, to designated successors, the nuts and bolts of the business and what made it successful.
Who defines fair?
But all that well-grounded advice for small business men becomes moot when owners face family situations that defy routine formulas. Then there is only one rule: Find a succession formula that gives the business its best chance to succeed after you retire. That means working out a smooth transition that's as fair and just as possible to all relevant family members.
Note that 'fair' doesn't necessarily mean equal. Furthermore, successful transitions seldom are built on a platform of perceived need. Plans built on qualities like trust, respect and loyalty are more likely to succeed.
Should day-to-day management of the business be left to the most-interested and most-involved heir while ownership shares are spread equally among the others? Would it be better for the enterprise and family to pass the business to the most actively involved heirs while using other ways to transfer wealth to those who are disinterested or unqualified? Experts tend to agree that one key element must be present- a transparent process that gives each family member a clear understanding of how you arrived at a just succession plan.
There are countless formulas to use basing your decisions on what you know about the inner workings of your family, your heirs' capabilities, their personalities and their individual perceptions of what is equitable and fair.
Today's grandparents are younger, richer and more generous
...as multi-generational households alter buying habits
Westport, CT - July 26, 2011 -The number of grandparents in the United States has hit a record high and is growing. In general, grandparents are younger, financially comfortable and bestowing a good deal of their money on grandchildren, according to a new report by the MetLife Mature Market Institute.
According to, The MetLife Report on American Grandparents:New Insights for a New Generation of Grandparents, produced in conjunction with noted demographer Peter Francese, there are 65 million grandparents in the U.S., an increase from 40 million in 1980; more than one in every four adults is a grandparent. Grandparents today, for the most part, are working age Baby Boomers between 45 and 64 years old.
Contrary to the stereotypical "grandma" and "grandpa" of yesteryear, today's grandparents are far from dependent. In fact, they are more likely to be sharing their resources with their children and grandchildren. Many of them are working age and most are heading households. While the real income of those ages 55 and over has risen, that of their children has declined. Grandparents are more likely than ever before to be college graduates, while college graduation rates have remained the same among younger men.
"The number of multi-generational households has increased, due in part to the recession," said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. "This trend, coupled with the increased financial instability of today's younger families, has huge business implications. The fact that grandparents are spending a great deal of money on infant food and equipment, children's clothing, toys, elementary and secondary school tuition, and financial, mortgage and insurance products, represents a change in buying habits and may change the way marketers and advertisers focus their efforts."
The MetLife Report estimates that by 2020 there will be 80 million grandparents who will represent one in every three adults. While the majority of today's grandparents are women (124 grandmothers for every 100 grandfathers), the gap is expected to close because older men are now healthier and living longer.
Additionally, the study found:
- Households headed by those ages 55 and older are now spending $2.43 billion annually on primary and secondary school tuition, about 2.5 times the amount of $853 million in 1999.
- According to the U.S. Census Bureau, the average age of new grandmothers is 50; it is 54 for new grandfathers.
In 2010, there were 39.8 million grandparent-headed households, one of every three households in the U.S. Only one in five grandparents lives alone.
- An estimated 4.5 million grandparent-headed households include one or more of their grandchildren; 11% of grandparent households have at least one grandchild and 60% of multi-generational households have two or more grandchildren.
Incomes of households headed by those ages 55 or older rose by $491 from 2000 to 2009, while those in the 25-34 and 35-44 age groups saw their incomes decline. 45- to 54-year-olds had just a $42 increase.
- A rise in spending on auto insurance by those ages 55 and older, coupled with a decline in such spending among younger people, suggests that grandparents may be buying insurance and/or cars for their children or grandchildren.
One in five grandparents is African-American, Hispanic or Asian.
Data for The MetLife Report on American Grandparents was gathered from the 2010 U.S. Census and compared with previous Census figures. Other information came from the Centers for Disease Control and Prevention and the Department of Labor's Bureau of Labor Statistics.
"The MetLife Report on American Grandparents:New Insights for a New Generation of Grandparents," can be downloaded from www.MatureMarketInstitute.com. It can also be ordered through Contact Uson the MetLife Mature Market Institute Web site, or by writing to: MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880 or MatureMarketInstitute@metlife.com.
Peter Francese
Peter Francese was founder of American Demographics magazine and speaks and writes frequently on consumer trends. Francese is also a frequent contributor to Advertising Age magazine. He has authored several books, articles and special reports on how to better understand consumer markets. His most recent book, with co-author Lorraine Stuart Merrill, Communities & Consequences,is on the future of New Hampshire. www.francese.com
The MetLife Mature Market Institute® The MetLife Mature Market Institute is MetLife's center of expertise in aging, longevity and the generations and is a recognized thought leader by business, the media, opinion leaders and the public. The Institute's groundbreaking research, insights, strategic partnerships and consumer education expand the knowledge and choices for those in, approaching or working with the mature market.
The Institute supports MetLife's long-standing commitment to identifying emerging issues and innovative solutions for the challenges of life. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 60 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, please visit: www.MatureMarketInstitute.com.
MassMutual Invests in Future Latino Business Leaders
Collaborates with ALPFA to Build Skills and Knowledge
and Help Improve Latino Community's Financial Health
SPRINGFIELD, Mass. -Massachusetts Mutual Life Insurance Company (MassMutual) and ALPFA, the largest association of Latino professional leaders, has announced a collaborative relationship aimed at helping the exploding number of Latino small business owners and families make good financial decisions for a more secure future. MassMutual's continued focus on providing much-needed financial education to the Latino community will be bolstered by its relationship with ALPFA, a nonprofit organization dedicated to preparing more Latinos for leadership opportunities and stronger prospects for the community.
"The Latino population's phenomenal growth, combined with the country's economic climate, makes it critical for this community to work towards greater financial security for individuals, businesses and families," said Chris Mendoza, assistant vice president, multicultural market development, MassMutual. "ALPFA is a natural partner for us because it is on the front lines of providing future Latino business leaders with the skills and knowledge to serve the financial needs of the growing Latino community."
The ALPFA Annual Convention taking place in Anaheim, Calif., from August 5-10th will be the site for MassMutual to unveil the early findings of national proprietary research that examines the state of small business owners' fiscal fitness. Although the U.S. Census indicates that Hispanic-owned businesses are increasing at more than double the national rate, growing by 43 percent between 2002 and 2007, MassMutual's research shows significant gaps in their fiscal knowledge and use of available tools to help them create a more solid future for themselves and their families. MassMutual will release the full study findings this fall.
"ALPFA members, both seasoned professionals and student future leaders, should understand and explore ways to close these gaps in our community's fiscal health. Along with MassMutual and other leaders in the business community, we must come together to determine strategies for improving Latinos' knowledge and financial confidence, so we can all better serve the community," said Manny Espinoza, CEO, ALPFA.
In addition to serving as a sponsor for the ALPFA National Convention, the 160-year-old MassMutual will support ALPFA's Leadership Summit in November 2011, participate in local chapter events and reach out to the organization's membership with employment opportunities and financial educational information.
The sponsorship of ALPFA is a key component of MassMutual's Hispanic Fiscal Fitness Initiative that includes partnerships with Latino nonprofit business organizations across the country to help Hispanic business owners and professionals improve their financial health. MassMutual has commissioned research on Latinos' fiscal health in Houston, San Antonio and Fort Lauderdale. The research being unveiled in August 2011 represents its first comprehensive analysis of Latino business owners at a national level.
About MassMutual
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company's strong and growing network of financial professionals helps clients make good financial decisions for the long-term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts, and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, Member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.
For more information, visit www.massmutual.com
About ALPFA
Established in 1972, ALPFA is the first national Latino professional association created in the United States. ALPFA provides members the foundation to advance Latino leadership through access to opportunities and the individuals that can impact them throughout their careers.
Today, with 15,000 members, including CEOs, CFOs and board members, through 39 professional chapters and 80 student chapters in campuses around the nation, the organization has the largest member base and footprint among professional associations for Latinos. For more information visit: www.alpfa.org.
American Charity:
How America's giving history shapes today's giving profile
by Eileen Heisman
Ms. Heisman is president & CEO of National Philanthropic Trust (NPT), one of the nation's largest providers of donor-advised funds.
As an advisor, you are deeply involved in key aspects of your client's financial life. As part of this guidance, are you including your clients' philanthropy goals? If not, you may be missing one of the most universal aspects of an American family's financial life.
Your clients likely make charitable contributions - 89% of Americans households do, and on average they give 3.2% of their incomes. As their trusted financial advisor, you are in a perfect position to help them develop a strategic giving plan; one that reflects both their values and their overall financial planning priorities.
Begin with the knowledge that philanthropy is an American phenomenon, dating back to our earliest colonial days. Many aspects of our society have since changed, but it is clear that our sense of community and philanthropy has not. As an advisor, do not underestimate your clients' desire to give, even if you have not broached the subject during your financial discussions. Helping your clients develop a strategic giving plan can give you a better understanding of their overall financial planning and priorities while helping them give effectively.
Looking Back to See What's Ahead
What can the last 100 years of American philanthropy tell you and your clients about the next 100?
In a nutshell: America's charitable inclination over the past century has been consistently strong while its expression has evolved with the times. Becoming familiar with trends and recent developments in the charitable sector will underscore your expertise in this important area of financial planning. For the better part of the 20th century, philanthropists focused on spreading their charitable dollars across the U.S. The onset of the 21st Century brought a global awareness that has inspired people to support causes around the world and new technologies have provided them with new ways to give.
Going Global, Social, Sustainable
Today, global and social giving continue to increase as media and technology help bring our world into focus. High profile challenges like the Billionaire Pledge and the Clinton Global Giving Initiative not only inspire people to give, but also highlight worthy causes and nonprofits at home and abroad. The internet provides immediate access to information about charitable organizations and campaigns. Now, people can also turn social networks to find out what causes their friends are supporting and learn about issues across the globe. They respond immediately -and in astounding numbers- via the internet and smart phones in the wake of natural and other disasters. With the onset of new technology, such as donating by text message, people continue to give generously.
Education and religion still attract the majority of charitable dollars in the U.S. However, social impact programs addressing environmental and international causes are more popular and receive more funding than a generation ago. Philanthropists today are increasingly more interested in sustainable and socially responsible investments. These models seek to create a positive, measurable impact beyond the initial charitable investment.
Much as unsung philanthropic hero Julius Rosenwald, co-founder of Sears, Roebuck and Co., created challenge grants to build schools for African Americans in the early 1900s, philanthropists today are exploring other new models for effecting change. Recent innovations in giving have yielding the rising popularity of microloans, or small loans to local entrepreneurs; 'reward' philanthropy, or awards offered for creative solutions; and embedded giving, or branded products whose full or partial profits are designated for charitable purposes.
No matter how or where Americans donate their money, what has remained constant is that they do donate in great sums. Even when the economy dipped to its lowest in the recent recessionary period, American charity remained at the same 2% of the GDP as it has through the decades—and as we can expect it to continue.Your clients are part of this sustained culture of American giving.
Why Americans Give
The reasons Americans give charitably, and do so at such a consistent level, are as varied as the donors who are making the gifts. There are a few factors of which we're fairly certain, and family influence in giving is key to inspiring the next generation. I know my own parents and grandparents were the strongest influence on my philanthropic values. Many of America's most generous philanthropists also cite their family's charitable history as a source for their own giving.
Family values not only guide new generations to give, but also influence the causes or institutions they will support. They also inform the types of giving vehicles they will choose. A discussion about your clients' family values and goals is always an excellent place to start when helping them develop giving strategies. The decisions they make today may well influence how their families give for generations to come.
Developing Strategic Giving Plan
The ability to create effective philanthropic strategies and to help establish a meaningful legacy is critical to the success of your relationship. Leverage your expertise to help clients develop a charitable giving plan that includes their financial, personal and philanthropic goals and that accommodates their- and even their children's -changing interests.
Establish the following key points as you guide clients through the philanthropic planning process:
Charitable giving and investment goals - define your client's goals to create both a framework on which to build a giving plan and against which to measure its successGiving budget, assets -determine how much cash and other assets your client would like to set aside for charitable activities.
Family involvement -ask if your client wants to involve family or to create a legacy to help you determine the best giving vehicles.
Giving vehicles -help clients understand the pros and cons of cash grants, matching gifts, private foundations, donor-advised funds, and other vehicles to find the most effective one.
Disaster response giving -almost a plan within a plan, include budget, priorities and types of gifts your client would like to make in response to disastersTarget gift recipients/organizations -identify the organizations and causes to which your client would like to contribute and remind them that selecting fewer organizations and dedicating funds on a long-term basis will create greater impact.
Success metrics -ensure clients understand the success metrics of their chosen nonprofits as the definition of success and ways to measure impact will vary from organization to organization
Helping clients develop a charitable giving plan is an opportunity for a meaningful discussion that can deepen the advisor-client relationship. The key is to partner an investor-style approach with a charitable strategy that focuses on your client's budget, priorities and measure of impact. Understanding how to sustain their giving can help ensure your client's charitable giving legacy. If there is anything to learn from the previous 100 years of giving, it's that it will certainly continue for the next century and beyond -and you and your clients will want be a part of it.
Visit Network for Good here
Oh, really?
Money and Mimicry
Money makes the world go round, doesn't it?
Money, money, money
Must be funny
Money, money, money
Always sunny
In the rich man's world.
-ABBA, 1976
We rely on money in our day-to-day life and it is constantly in our minds. After all, money makes the world go round, doesn't it? Now, a new study, which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science, tries to better understand the psychological effect of money and how it affects our behavior, feelings and emotions.
Jia Liu, at the University of Groningen, co-wrote the article along with Kathleen Vohs at the Carlson School of Management, University of Minnesota and Dirk Smeesters at the Rotterdam School of Management to explore the relationship between money and mimicry. "The idea of money can activate two motives: autonomous goal striving (being independent and autonomous) and interpersonal insensitivity (indifferent to others). We were interested in which of them dominates when the idea of money is activated," says Liu.
Behavioral mimicry involves taking on the postures, mannerisms, gestures, and motor movements of other people without conscious awareness. Another term for it is non-conscious imitation. It is intimately tied to relationships, liking, and empathy, functioning both as a signal of rapport and as a tool to generate rapport.
According to Liu and her colleagues, previous research in the area of mimicry discovered that if a person is mimicked by someone, they end up liking the other person more than when they are not mimicked. However, Liu and her colleagues were not entirely convinced about the positive effects of mimicry and theorized that mimicry might actually result in negative effects when a person is threatened, especially if they were reminded about something such as money.
To test their theory, 72 students were asked to complete several unrelated tasks. First, they did a filler task on the computer in which the screen's background depicted either pictures of money or shells. Then, in another task, each participant interacted with a colleague and discussed a product. During the conversation, the colleague either unobtrusively mimicked participants' nonverbal behaviors (i.e., matching their postures and gestures after approximately 2 seconds) or did not mimic at all. Finally, participants' feelings of threat were measured and they were asked how much they liked the colleague they had interacted with.
"This study demonstrates money's ability to stimulate a longing for freedom, as money-reminded people perceive the affiliation intention expressed by mimicry to be a threat to their personal freedom, leading them to respond antagonistically in defense. This could have important implications for social bonding and forming interpersonal relationships, as affiliation attempts by others can backfire," states Liu and her colleagues.
Simply put, people tend to feel threatened and end up disliking those who are trying to bond with them when reminded about money.
Health Insurance Exchanges Give Purchasing Power to Consumers
and Creates a Nearly $200 Billion Market for Insurers
Insurers Face New Competitive and Business Risks in Individual and Small Group Health Markets
NEW YORK, July 12, 2011 -Millions of Americans will soon gain what they have long waited for in healthcare: Purchasing power that will make health insurers want to work harder to win their business and loyalty. According to a new report published [last week] by the PwC US Health Research Institute (HRI), insurers will compete head-to-head when state health insurance exchanges begin offering policies to individuals and small groups. PwC estimates these policies could be worth nearly $60 billion in revenue premiums by 2014 and grow to nearly $200 billion by 2019.
The Congressional Budget Office (CBO) estimates that 12 million consumers will buy health insurance in the exchange market in 2014, rising to a population of nearly 28 million consumers by 2019. Despite concerns and unresolved legal and design questions, many insurers feel they cannot afford to opt out of health insurance exchanges. Those who participate, however, will face new business risks, stiff competition and millions of consumers newly armed with the power of choice, says PwC.
PwC's report entitled Change the channel: Health insurance exchanges expand choice and competition, is PwC's most extensive research to date on health insurance exchanges. It draws on insight from a nationwide survey, commissioned by PwC, of 1,000 consumers and 153 health insurance executives concerning their expectations around health insurance exchanges. In addition, PwC conducted in-depth interviews with 35 health industry leaders, including those representing state insurance exchanges, health insurers, policy makers, consumer advocacy organizations and independent quality organizations.
While the nation waits for states to declare whether they will develop their own exchanges by the January 1, 2014 deadline, or have the federal government do it for them, health insurers are debating their own decisions on how and where to play in this market. Those who participate will need to ramp up quickly and make significant changes to their businesses. This includes selling health insurance to individuals in a retail market and moving away from a reliance on risk selection to a focus on population risk management, since the law requires insurers to accept all eligible members regardless of their health.
PwC's research found the following:
- More than half (52 percent) of health insurance executives said their companies plan to compete in the individual or small group exchanges, and nearly one-third are considering it but are still undecided. Seventeen percent of insurers do not intend to participate.
- Of those insurance executives who said they plan to participate in exchanges, nearly two in five (37 percent) are not active in the individual market today and one in five (20 percent) does not offer small group policies.
- Insurers' number one concern insurers have is the impact of adverse selection on their business if they receive a disproportionate number of high-risk patients. The second biggest concern is the ability to integrate technology with the exchanges.
- On average, insurers expect it will take approximately 15 months to get their businesses ready for exchange certification by the federal government. Forty percent expect it to take 18 months, and 20 percent believe it will take two to two and a half years before they are ready.
"Health insurance exchanges will be one of the most market-changing aspects in the Patient Protection and Affordable Care Act," said Jeff Gitlin, U.S. healthcare payer practice principal, PwC. "Insurers will need to shift from a wholesale approach to more of a retail way of interacting with consumers and compete in ways they never have before to earn consumers' business and loyalty. As in all retail businesses, insurers will want to understand who these consumers are, what motivates them and how they behave."
State exchanges will vary, and insurers must decide which ones to enter
PwC's report outlines the key considerations for insurers as they gear up for participation in health insurance exchanges, including the relevant impact of various exchange models on their business. Each state has flexibility in how to design and operate an exchange, which could mean dozens of variations in exchange models across the country. The differences could make some exchanges profitable for some insurers but not for others, says PwC, and insurers will need to decide which ones they will enter.
Most insurers surveyed by PwC are hoping that states opt for a variation of the open market model, such as the one used in Utah, where any insurer can sell policies on the exchange as long as it meets certain minimum benefit requirements. Only 10 percent of insurance executives surveyed prefer the active purchaser model where the state evaluates and selects insurers in a competitive bidding process. The active purchaser exchange model was adopted in 2006 by the Massachusetts Health Connector, and PwC's report includes cost containment lessons from health insurers operating in the Massachusetts market today.
New requirements usher in new consumers
When exchanges open up to consumers in 2014, nearly all participants (97 percent) are expected to be individuals who currently do not have health insurance coverage, according to PwC’s analysis of CBO projections. According to the PwC report, health insurers and exchanges will face an enormous consumer education challenge to help individuals understand eligibility requirements, and that one of the first hires exchanges need to make is a communications director. Moreover, as insurers move from a largely wholesale to retail business model, they will need to become much more user friendly and improve their understanding of consumers' needs and behaviors so they can tailor communications, products, and services.
PwC's consumer survey found:
- Not surprisingly, the two most important considerations in choosing a health plan are price and benefits, although preferences vary with income. Thirty-seven percent of upper income respondents ranked benefits as their most important consideration and 23 percent ranked price, whereas 43 percent of those with lower incomes (Medicaid eligible) ranked price as most important and 23 percent ranked benefits highest.
- Three-fourths of consumers said that insurers need to be clearer about what they are selling, particularly about what is and is not covered. Forty-three percent said they would like a tool that estimates prices for common procedures and 37 percent want a way to easily compare insurance products.
- Over half (53 percent) of respondents say they would not be willing to pay a higher price for any additional health insurance feature, such as dental coverage, choice of doctors or vision coverage.
-Younger consumers (aged 18 to 34 years old) are three times as likely as consumers over 45 to be willing to give up their choice of doctor for a lower health insurance cost.
- Sixty-one percent of consumers said they think health insurers should offer rewards, such as discounts or gift cards for healthy behavior. Offering rewards was cited as a top loyalty driver, although nearly one-third would forego the reward in exchange for lower cost insurance.
- Current Medicaid recipients are six times more likely than current commercial consumers to prefer companies that offer social services assistance such as transportation to and from the doctor, and those with middle incomes are more than twice as likely to feel the same.
Insurance sales model and broker roles to evolve
Insurance executives surveyed by PwC said they expect sales through brokers to decrease by approximately 20 percent when the exchanges open and that those sales will move to a direct-to-consumer, online sales channel.
Insurance brokers and internal sales teams currently are health insurers' primary mechanisms for attracting and retaining customers in today's individual and small group markets. In 2014, exchanges will assume responsibility for compensation, and insurers will lose their ability to offer brokers financial incentives for selling their products.
The need for brokers is not expected to go away in 2014, but the functions brokers perform will change over time. PwC's survey found that 46 percent of consumers think it would be easier to shop for insurance if they had someone to talk to at the insurance company. Consumers are not yet accustomed to buying insurance online, and it is a complex purchase. So, while brokers will not be negotiating premiums for exchange-related business, they can play a key role in educating consumers. Insurers would be well-served by finding new ways of influencing brokers, according to PwC.
A full copy of Change the channel: Health insurance exchanges expand choice and competition is available for download at www.pwc.com/us/HIX.
Control. Transparency. Stability
Three imperatives to expect in your financial alliances
by Mark Caner, MBA, AEP, ChFC, CLU, CFP
Mr. Caner is president of W&S Financial Group Distributors, Inc.
Between banks, insurers, credit unions, investment companies, savings and loan associations, mutual fund complexes, brokerage firms and the like, multitudes of financial services providers in the U.S. offer a vast array of investment products. Given so many choices, "where to begin?" is the first question. Determining which providers to work with for your personal financial needs is quite a challenge.
Some may think it comes down to particulars such as interest rates and product features. And all good places to start. But they're not where to stop.
As in any relationship, financial or otherwise, it's important to take a closer look. In this case it means scanning the marketplace for companies that embody certain philosophies, ones incorporating core qualities that best serve their customers in the long run. To inspire confidence in the management of your hard-earned money, three fundamental qualities stand out as ones a financial services provider should exemplify. Let's examine them.
Control
Maintaining the degree of control over your money and investment decisions that most closely suits you is one of your smartest moves when pursuing your financial strategies.
Investment decisions are only one element of plotting and pursuing your financial course of action. A comprehensive money management approach encompasses maintaining access and control to manage your investments over time and through risks. The world changes, we see it every day. Markets go up and down. Unanticipated events can and do occur. All this can change a person's thinking on what's right for their financial future.
Investments that are inflexible limit your ability to react to evolving needs and shifting financial conditions. Worse yet, investments with contractual provisions that divert you in a different direction from your original choices in effect remove control from your hands. Under such a scenario, you may find your initial plans reoriented in directions you never intended or anticipated.
Selecting products and choosing companies that provide you with your desired degree of control of your financial future is a foundation in maintaining your financial security. After all, if you don't have control of your money, is it really your money?
Transparency
Many pundits and periodicals make their living loudly rendering judgment on what financial products to purchase or avoid. But for all their specific recommendations and cautions, the real answer is much broader yet quite a bit simpler.
Avoid any financial product you do not understand. Put another way, transparency is imperative for any product a client considers.
Are there financial products in the marketplace right now that ultimately will not live up to expectations - or worse? Sure. But the truth is, any product can be a potential pitfall if you don't understand how it works, how it benefits you, and conversely, how it limits you.
Before you put your money down on any financial decision, ask questions. Then ask more questions. If you don't perform your due diligence, a product that might be a dream solution to others could be a nightmare to you. And vice versa.
That's also why it is important to work with companies that are transparent in their dealings. Companies that readily furnish you all the information you request and then some, in a clear, concise fashion. Companies that are proud to share their history, affiliations, practices and financials.
A transparent company accepts responding to such queries as a fundamental responsibility of maintaining the confidence of its customers.
Stability
In addition to control and transparency, the third imperative in any financial alliance is stability. A company will have a hard time providing customers a secure financial future, unless it has one itself.
Many organizations "talk a good game" when it comes to strength, security and stability. But are they in a position to back it up?
Financial stability can be judged by internal measures, such as the length of a company's operating history and the adequacy of its capital position. It can also be assessed by external sources, such as high industry and financial ratings.
These factors help demonstrate a company's resolve and resiliency, both now and throughout challenging economic times. They are proof points providing assurance that their contractual commitments can be depended on to provide peace of mind.
Control. Transparency. Stability.
It's been said the problem we face in today's world isn't information overload, rather the problem is filter failure. Our challenge as informed consumers is to identify what matters most.
Trust your judgment in protecting your self-interest. We believe the characteristics of control, transparency and stability provide benchmarks by which to separate a good financial services organization from a great one.
Control, transparency and stability and what they mean for you are far too personal to be judged from a company's advertising or public relations. Business practices, product designs and professional relationships are the difference-makers that become apparent as you take a deeper look at a potential partner in securing the long-term financial well-being of you and your loved ones.
Planning for a Successful Divorce Mediation
Today, a comprehensive financial plan must consider the possibility of divorce.
While mediation seeks to avoid costly, damaging litigation, it might also help avoid
a retirement plan from disintegration
by Dawn Colsia, JD, PhD; Mark Holland, CPA; Martin Murphy, JD
Ms. Colsia is affiliated with Alternative Resolution Advisors, Newton, Ma. She can be reached at drdawn@ alternativeresolutionadvisors.com. Mr. Holland is president of Wellesley Financial Advisors, LLC, Newton, Ma. He can be reached at wellesleyfin@aol.com; Mr. Murphy is a principal with the Law Office of Martin Murphy. He can be reached at marty@martinmurphyatlaw.com
Introduction to Mediation
Mediation offers a private and confidential alternative to litigation. Both parties meet with one mediator to discuss and decide upon the terms of an agreement. A neutral third person mediator guides the parties on a journey to look forward and create an agreement that works for everyone involved. During mediation, those getting divorced retain control over the negotiation process and are empowered to make choices for themselves. Mediation allows a balancing of power between the parties so that they can share in the decision-making instead of having a decision imposed by a court.
When parties choose to mediate instead of litigate, it is helpful to have both parties consult a financial neutral so that a true valuation can be made of marital assets. Instead of arguing over what assets are worth, the financial neutral brings transparency to the table for the benefit of all involved. Having each party consult with their own attorney ensures that each is fully apprised of their rights and responsibilities under the law.
Principles of Mediation
Five principles govern the mediation process. Each party to the divorce has a right to informed consent or information about the process and their legal rights with regard to the terms of any agreement developed. Individuals are empowered to make choices for themselves, to define their issues and needs and to determine the outcome by self-determination. The mediator conducts the process in a fair, equal and impartial manner and remains neutral. All information discussed during mediation is confidential so that both parties are free to explore all issues and potential solutions with candor. Last, the mediation process is voluntary.
Case Examples
Richard Skeller had been thinking about asking for a divorce for a couple of years. Since he moved out of the marital home it was difficult to maintain a working relationship with his wife Debra and that had a negative impact on his relationship with their two children. Richard's friend Bill told him that he spent $35,000 on his divorce including the attorney's fees and his own financial expert. In addition, Bill's wife had spent $40,000 for her own attorney and financial consultant. Most distressing though, was that Bill and his ex-wife were unable to work together to provide for the needs of their children because there was so much acrimony. Richard heard that mediation enabled the parties to work together to develop an agreement and that they could use one financial expert to bring transparency to the negotiations. Since Richard wanted very much to find a new way to work with his wife so that they could jointly provide for their children, he inquired about mediation. This article suggests a way for Richard and Debra to decide upon the terms of their divorce agreement in a way that minimizes acrimony and may lead to a new working relationship for the future.
Nancy Smith asked her husband, Jeff, to leave after learning that he had an affair. She consulted with a divorce lawyer and was told that although adultery was technically grounds for filing for divorce, it would not make a difference in the property settlement she would receive unless her husband squandered marital assets to conduct the affair. After watching her friend Molly spend five years enmeshed in legal wrangling when she got divorced, Nancy decided that she wanted to pursue a process that would enable her and her soon to be ex-husband a way to exit their marriage with dignity and self respect. She asked Jeff if he would meet with a mediator. This article explores best practices to use in a mediated divorce.
The Mediation Process
During the mediation process, the parties jointly meet with a mediator to discuss the interests and needs of the parties and the children and options for resolution are explored. Issues discussed may include:
- Children (custody, parenting plan, traveling, moving, relationships with relatives, religion, emergency care),
- Support for children and or spouse or partner (how much, how often, how paid, how long, tax consequences and future adjustments),
- Education (day care, private or religious school, college, graduate school, extra-curricular activities and lessons, summer camp, making decisions and payment)
- Insurance (medical, dental, eye, life, uninsured expenses),
- Taxes (pending refunds/liabilities and deductions for children),
- Property division (home buy out/sell/keep),
- Assets such as personal property, household goods, inheritances, cars, land), and
- Other matters such as pets.
Parties often find a new way to work with each other during the mediation process so that a more workable relationship persists into the future. When faced with the tasks of maintaining a workable relationship for the benefit of children, agreeing on a parenting plan, providing for your financial future and dividing assets, mediation can bring renewed hope for the future. The parties know better than any judge the details of the situation and how a workable agreement can be created for the future. Mediation allows the parties to participate in a thoughtful negotiation process and then make decisions for themselves so that the agreement works for everyone involved.
Use of a Financial Neutral in a Mediated Divorce
The identification and valuation of marital assets, liabilities and other important financial matters in a mediated divorce can be a daunting assignment. Even the most financially skilled couples can find this to be a very difficult task. A financial neutral, typically a Certified Public Accountant (CPA), a Certified Financial Planner (CFP) or a Certified Divorce Financial Analyst (CDFA) can provide valuable, independent and impartial services to both spouses in a mediated divorce. The financial neutral's goal is to assemble a complete, accurate and fully transparent accounting of all the financial issues involved in the divorce. The need to retain a financial neutral becomes even greater when addressing the financial concerns of higher net worth couples who have accumulated a broad mix of assets financed, in part, by varied, complex credit arrangements.
It is not uncommon for married couples to have to address a variety of complex financial issues including but not limited to: large compensation and fringe benefit packages, multiple home ownership including 'time share' and related mortgage loans, taxable investments of all kinds, taxed deferred investments (IRAs, 401ks, pension plans), insurance (life, health, disability, homeowners, personal liability), other assets, liabilities and financial issues (personal property, collectables, country club memberships, social security, personal loans). A financial neutral can be of great value ensuring that the listing of these assets, liabilities and other financial matters are complete and fairly valued.
Case Examples
The following are a couple of examples where the use of a financial neutral was able to identify some significant financial issues that might otherwise have been overlooked.
Judy and Dan Collins had been married for thirty-five years when they decided to divorce. Although both Judy and Dan were deeply hurt that their marriage was coming to an end, they elected to pursue a more pragmatic approach to divorce and retained the services of a mediator and a financial neutral. Judy, a partner, in a large public accounting firm was looking forward to her retirement next year. Dan had been a 'stay at home dad' for the last twenty years raising the Collins' two children who were now in their last years of college. Both Judy and Dan provided the financial neutral with a great deal of financial data in order to develop statements of marital net assets and cash flows. The financial neutral, a CPA, noticed that Judy did not provide any documentation about the return of her partnership capital following her retirement. Judy indicated that she had inadvertently missed this issue and subsequently disclosed that she would be paid approximately $500 thousand from the firm after her retirement over a 5-year period. The financial neutral was able to bring transparency to the process so that Judy and Dan's marital net assets were substantially increased for division.
Emily and Eric Feinstein had been married for twenty years when they decided to divorce. Eric was the President and CEO of a substantial investment firm specializing in the sale and management of real estate investment partnerships, primarily for institutional investors. As a matter of good business practice, the senior executives of the investment firm are expected to personally invest in real estate partnerships they sell to other investors. Emily was the homemaker who invested the better part of seventeen years raising her three sons. In order to minimize the legal expense of a contested divorce and the acrimony that frequently follows, the Feinsteins sought a mediated divorce and use of a financial neutral. In their initial meeting with the financial neutral, Eric was asked to list all the real estate partnerships in which he had invested as well as to forward his and Emily's joint tax returns for the past five years. Eric mailed the requested information to the financial neutral who in turn sought to reconcile the listed partnerships with the income earned from the partnerships as reported in their joint income tax returns. Upon performing this exercise, the financial neutral recognized that there were two real estate investment partnerships holding Martha's Vineyard commercial property that were included in their tax returns but were missing from Eric's list. When asked if these two partnerships were still active, Eric responded that they were. He then indicated that he had acquired these interests at a prior employer and just forgot about them. Naturally, Emily felt comforted knowing that the financial neutral had unearthed this discrepancy. The financial neutral also recommended that Emily become a fifty percent partner in all the active real estate partnerships as opposed to waiting for Eric to make periodic distributions to her. By doing this, Emily would be assured that she would receive directly from the partnership audited financial statements and periodic cash distributions. Additionally, she would be taxed at a lower marginal federal income tax rate than her soon to be ex-husband.
How To Benefit From Consulting With An Attorney in Mediation
Attorneys are trained to zealously advocate for their clients. Unfortunately, attorneys who are not trained in the benefits of mediation are often unable to accept that the process itself can have as much impact on the client as the outcome. Mediation friendly attorneys understand the benefits of an agreement that is intentionally pursued as opposed to an agreement reached on the courthouse steps with parties who are emotionally and financially fatigued.
More importantly, mediation friendly attorneys recognize that mediation can greatly reduce the collateral damage done to the children, family members and the professions or businesses of the parties. When selecting an attorney to work with while participating in mediation, be sure to inquire as to their opinion and approach to this non-adversarial process.
Mediation is a voluntary process, which means that the parties reserve their right to seek relief from the courts through litigation in the rare case that the mediation is unsuccessful. Participants in family law mediation typically do not have their attorneys participate directly in the mediation sessions. Instead, the parties will meet with their attorney at the outset and end of the mediation. In addition the attorney would be available at any time during the process to discuss the legal issues at hand and the criteria that should be applied.
Areas for discussion may typically include:
Parenting Plan
When a judge considers a proposed parenting plan by the parties they will apply the standard of what will promote the 'child’s best interest'. Judges have broad discretion in these matters. A variety of factors may be considered by a judge when formulating decisions regarding custody including the age, sex and developmental stage of the child, each parent's home environment, who has been the primary caregiver and the judge's own observations of the parents.
Child Support
An attorney can help the party understand how the Child Support Guidelines apply to their family. Your attorney and your financial professional can help you understand the tax implications of child support and the potential relationship with an order for alimony.
Division of Marital Assets
Massachusetts General Law c. 208, section 34 lists the mandatory and discretionary criteria the court uses in considering how to craft an equitable division of the marital assets. If the parties to mediation develop a proposed division of assets, the court will most likely approve it so long as the court finds it fair and reasonable.
Alimony
The overriding goal when considering the award of alimony is to attempt to maintain a standard of living comparable to the one enjoyed during the marriage. An Attorney can help the client by applying some of the non-statutory formulas used to make a determination as to what level of alimony, if any, may be accepted by the court. At the time of this article, there is momentum in Massachusetts for alimony reform. For years, many have felt the current system to be unpredictable and inconsistent. The current reform proposals seek to increase the consistency of application of the law.
While an attorney can be helpful during the mediation process, the greatest value may be towards the end when the mediator prepares a proposed separation agreement. The goal of the mediator is to memorialize the intent of the parties with regards to the interests they discussed. However, there are times when an agreed upon interest may have unexpected consequences. The attorney can make his client aware of some of these pitfalls. The client can then return to the mediation to resolve that issue and proceed with finalizing the documents.
Case Example
A client who was participating in mediation presented a draft separation agreement that had been agreed to in principal by the parties. While the agreement on its face appeared to memorialize the intent of the parties, there were a number of sections that needed additional detail. The spouse remaining in the home would be responsible for the first $1,000 of costs for a capital improvement or repair. The attorney expressed concern that with the age of the house it was possible to have several major capital improvements over the course of one year. The client immediately realized that the potential additional costs were well more than what had been intended during the mediation. The parties agreed to language that protected the client from the financial impact of multiple repairs in one year.
Attorneys Help the Mediation Process Succeed
In addition to the Separation Agreement, there are many other documents that may need to be filed with the court. If the parties are using a mediator who is an attorney, they may draft some of these documents for their mediation clients. If however, the mediator is not an attorney, the party will most likely need some assistance in preparing these documents for filing with the court.
Mediation friendly attorneys can provide numerous benefits to their clients while they are involved in divorce mediation. Identification of the pertinent legal issues, education as to the legal standards, and experienced document review, can all be provided in a convenient and cost effective manner. While advocating for their client, mediation friendly attorneys can work with the other neutral professionals in this non-adversarial process to best assist the client during this important period of transition.
Summary of Best Practices
Mediation offers several benefits over engaging in an expensive and protracted litigation process. Most importantly, mediation offers the possibility of preserving a workable and respectful relationship with others involved. Furthermore, the cost savings with mediation can be substantial. During mediation, the bulk of the time is spent negotiating an agreement to resolve all outstanding issues. If the parties utilize one mediator to negotiate the agreement, each consults with their own attorney as needed, and they together utilize one financial neutral to bring transparency to identify all financial assets, the cost savings can be substantial.
When parties utilize mediation instead of litigation it is important to ensure that each party understands their individual legal rights and that each party is fully aware of all financial implications of the divorce. Each person arrives at the divorce process with different levels of expertise with regard to knowledge about the law, the details of assets and liabilities and their knowledge regarding the needs of the children. Best practices, as discussed in this article, permit each party to gain more knowledge of all relevant areas.
The financial neutral's mandate is to represent both spouses' interests equally and to make sure that they understand all the financial issues involved through every step of the mediation process.
The use of a financial neutral helps the parties to accurately identify all assets, liabilities, investments, and employee benefits so that a fair and reasonable settlement can be reached. When both parties consult their own financial expert the process often becomes adversarial and a true value of all assets and liabilities can be difficult to ascertain. In contrast, when the parties together consult a financial neutral, the financial expert can provide a fair evaluation of the parties' financial situation.
During the mediation process it is recommended that each party consult his or her own attorney. It is important that each party have their own counsel so that they are aware of their rights and responsibilities under the law. Consultation with an attorney in this way is much less expensive than utilizing an attorney for the entire process. The parties can then request that one of the attorneys submit the required legal document to court or they can proceed on their own. The most important aspect of mediation is that it enables the parties to engage in a thoughtful process where everyone's needs are considered and it brings renewed hope for a future workable relationship.
The information presented in this article is not intended to, nor should anyone rely on it for legal, accounting, tax, or financial planning advice. Such advice should only be provided upon review of specific facts and circumstances that are unique in each case. The authors encourage you to contact an experienced professional to determine if your facts and circumstances may require assistance.
copyright 2011 Dawn B. Colsia, Mark W. Holland, Martin P. Murph
Middle Class Sending Mixed Signals On Debt
Financial Behaviors Index reveals
Americans are taking out new loans while continuing to pay down existing debt
FORT WORTH, Texas- At a time when economically-stressed Americans continue to focus on reducing personal debt, a growing number of middle-class families are taking out new loans, according to the First Command Financial Behaviors Index.
Recent findings of the monthly survey reveal that while 68 percent of middle-income consumers say they are at least 'somewhat aggressively' paying down their debt, 43 percent have taken out at least one new loan in the last 11 months.
Americans report that they are taking on new financial commitments through:
- Credit cards (18 percent).
- Auto loans (14 percent).
- Retail cards (11 percent).
- Mortgages (8 percent).
- Bank cards (7 percent).
- Student loans (6 percent).
- Home equity loans (4 percent).
- Consumer finance loans (3 percent).
The new debt trend appears to be accelerating, too. During the previous three months, nine percent of survey respondents took on new credit card debt and five percent took out an auto loan.
"This growth in borrowing is an unexpected turn in what had appeared to be a relatively straight road toward debt reduction," said Scott Spiker, CEO of First Command Financial Services, Inc. "Since early 2010 we've been seeing a consistent focus on cutting debt as part of an overall strategy to improve family finances and embrace frugal living. By taking on additional loans while paying down existing debt, Americans are sending a mixed signal that we'll be closely monitoring in the months to come."
This new willingness to take on debt appears to be at odds with middle-class attitudes regarding debt. During the past 11 months, 26 percent of middle-class consumers have taken on new debt through credit cards, retail cards and bank cards. But at the same time, 38 percent of respondents agreed with the statement 'the thought of cutting up my credit cards makes me feel relieved.'
Americans continue to display a decidedly anti-debt attitude. Eight out of 10 survey respondents said that paying down debt is currently their No. 1 priority, and nine out of 10 said in a perfect world they would not have any debt. When asked why they are working to reduce debt, just four percent of Americans said they were doing so to take out another loan.
Middle-class families are working to reduce their debt load by:
- Decreasing everyday expenses (53 percent).
- Using all of their extra income for debt payments (42 percent).
- Paying down the minimum amount each month (18 percent).
- Working extra shifts/overtime to get more money for debt payments (15 percent).
"Underlying these debt-reduction strategies are persistent concerns about the state of the U.S. economy," Spiker said. "Four out of 10 middle-class Americans say the economy will continue to fall deeper into a recession."
About the First Command Financial Behaviors Index
Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index assesses trends among the American public's financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. Visit here
Back to Top-->