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May 10, 2021
 
Congressional Conference: NAIFA’s May 25-26 Congressional Conference is less than two weeks away. If you haven’t already, please register now for this all-online virtual conference that will be key to a successful defense against adverse tax proposals that could hurt permanent life insurance, investments, health insurance, and employer-provided benefits. 
 
We now know the tax increases President Biden is proposing: an increase in the corporate and top individual tax rates, repeal of step-up in basis (potentially with a rule that makes transfers at death taxable events), and a hike in the capital gains tax rate. We also know that Congress will write the actual legislation and that more adverse tax proposals may emerge from that process. We already see proposals to add a wealth tax and a financial transaction tax (FTT), to tax annual gains in investments (that could include permanent life insurance), whether or not the asset is sold or the gains are otherwise realized, repeal or modification of the Section 199A 20 percent non-corporate business income deduction, and changes to estate tax planning techniques. Any of these could find their way into the legislation Congress will be crafting and considering over the next few weeks.
 
Tax: Congressional tax writers report considerable push-back on many of the proposed tax increases in President Biden’s “Build Back Better” initiative (the American Jobs Plan/AJP and the American Families Plan/AFP). Among the proposals getting stiff resistance are the 28 percent hike in the corporate tax rate (although at the moment, it does appear that Congress may accept a 25 percent corporate rate, which would be up from current law’s 21 percent), the repeal of step-up in basis (and the likely rule that would go with it that would trigger tax liability on inherited assets at the time of inheritance), and the increase in the capital gains rate (to 39.6 percent for those earning $1 million or more in a year).
 
Republicans are united in opposition to changing any of the 2017 tax reform law’s rules, but some Democrats are also expressing skepticism over these proposals. And Democrats can’t afford to lose any votes in the Senate and only three in the House. 
 
Plus, we don’t yet know what other adverse tax proposals will emerge (although it’s a very good bet that more will become part of the Congressional legislation). The possibilities are many (and scary): a wealth tax, a financial transaction tax, estate planning (trust) rules, a change in the 199A 20 percent deduction for non-corporate business income, an investment income tax, more rate changes (especially in the estate and gift tax), etc. How extensive the risk we face is should become clearer by mid-summer, if not sooner. Stay tuned.
 
Worker Classification: Last week, the Department of Labor (DOL) officially and formally rescinded the Trump-era worker classification rule and promised vigorous enforcement of the historical multi-factor control test that has governed whether a worker is an employee or an independent contractor. DOL stopped short of saying they would initiate a new rulemaking initiative, but Washington insiders expect the Department to do just that—with California’s ABC test (without California’s exceptions, including for insurance agents) as their starting point. We’ll keep you posted as this issue develops.
 
Retirement Savings: Last week, on a unanimous and bipartisan basis, the House Ways & Means Committee approved H.R.2954, a second-generation retirement savings bill usually referred to as “SECURE 2.0.” The “Securing a Strong Retirement Act” (the bill’s official name) makes 42 largely helpful rules changes to enhance retirement savings opportunities. SECURE 2.0 is now ready for a vote by the full House, but as yet, no date for House floor action has been set. The bill does have widespread bipartisan support, though, and is expected to pass when the House votes on it.
 
Among the provisions contained in H.R.2954 are:

• A rule that would require new 401(k) plans to include an automatic enrollment provision—subject to a rule that allows employees (participants) to opt-out

• An increase in the age at which required minimum distributions (RMDs) must be taken from 72 to 75 (phased-in—the age would go to 73 in 2022, to 74 in 2029, and to 75 in 2032)

• An increase (to $10,000) in catch-up contribution authority for those aged 62, 63, and 64—under Roth rules—for 401(k) and 403(b) plans, and to $5,000/year at ages 62, 63, and 64 for SIMPLE plans; in addition, the bill would index the IRA catch-up contribution limit for inflation

• A reduction in the time a long-time part-time worker must work prior to being eligible to participate in an employer’s retirement savings plan from three years to two years 

• Authority for 403(b) plans to participate in MEPs and PEPS (Multiple Employer Plans and Pooled Employer Plans)

• Enhancement of the small employer retirement plan start-up cost tax credit—the tax credit would increase from 50 percent to 100 percent for employers with up to 50 employees, plus the amount of the credit would be increased for five years by a percentage of the amount contributed by the employer to its employees, up to a per-employee cap of $1,000 (the percentage starts at 100 percent in years one and two and phases down by 25 percent per year until year six)

• A rule that would allow student loan payments to qualify for employer matching payments

• A rule that would require plan statements to be distributed on paper once per year (quarterly statements could be transmitted electronically)

• A missing participant program administered by the PBGC (Pension Benefits Guaranty Corporation) that would make it easier for plan participants to find “missing” vested retirement benefits—this provision also increases the mandatory cash-out cap from $5000 to $6000
• Modification of the rules that allow direct-from-the-plan contributions to charities that would comply with the RMD rules

• Modification of the error resolution/excess contribution rules that would reduce the penalty for corrected RMD failures to 25 percent (10 percent if correction is within two years of the error)

• A new start-up rule for 401(k) plans for the self-employed and single-employee LLCs

The sponsors of H.R.2954 – Ways & Means Committee Chair Rep. Richard Neal (D-MA) and Ranking Member Rep. Kevin Brady (R-TX) – have been working with their Senate counterparts, and so this bill has good chances in the Senate, too. There will no doubt there will be changes made Senate-side, but there is considerable agreement already between the two legislative chambers. Senate staffers tell us they expect the Finance Committee to consider the Senate version of the bill later this summer, or perhaps in early fall. They expect the bill to move under regular order (i.e., outside of reconciliation and with substantially more than 60 votes). 
 

 
NAIFA’s Monday Morning Memo is a weekly update memo prepared for NAIFA’s Government Relations Leadership by Danea M. Kehoe, of Counsel to NAIFA. Comments contained in the Monday Morning Memo will be topical, timely, frank and - as they are intended solely for the members of the Government Relations Leadership – Confidential and Privileged. All Government Relations Leaders with questions or comments may e-mail dkehoe@naifa.org.

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​Why Disability Insurance is Important:

This chart based on Gen Re Research, tells us:

1. In a time where people were really worried about getting sick and not being able to work, there was uncertainty about jobs, but advisers weren’t talking about it.
2. When You compare DI policies to individual life policies sold in the same period DI is the stepchild, as in 2019 almost 2MM life policies were sold and in 2020 over 2.4MM life policies were sold.
3. There was a significant drop in in force policies as people lost jobs, retired, and conserved expenses
   1. This is an opportunity to reach out to folks today
   2. Growth opportunities are there
4. Total in force individual policies for DI, including BOE, IDI, and Buy/Sell are slightly more after years of selling than what was sold for new policies in life in one year.
5. Of the total policies sold, here is the breakdown:
   1. IDI – 85%
   2. BOE – 13%
   3. Buy/Sell – 2%
6. Business Owners aren’t covering their business properly
   1. With only 13% of all DI policies from BOE, overhead is not being covered threatening a business owners’ business if they are sick or injured.
   2. 58% of all businesses have partnerships, and very few are covered in the case of a disability.

Notable DI Statistics:

• 51 million working adults in the U.S. with $75,000 or more in income are without disability insurance
• 25% of todays 20-year old’s will be out of work for at least a year because of a disability.
• Around 40% of disability insurance are declined, modified, rated, or only accepted with an exclusion
  • Underwriting is different than Life.  It is why you need an expert who:
    • Knows the different products
    • Gets the policy pre-screened
    • Can get the medical history upfront
• Almost 90% of long-term disability claims are caused by:
  • Illnesses
• Only 10% of long-term disability claims are caused by
  • Accidents
• 25% of short-term claims are from pregnancies – Some Companies now cover that for Long Term Disability
• The Most Common reason for a long-term disability claim to be filed is Musco-skelteal at 29%
• Only 3% of all workers have group insurance, which is not always sufficient.  To get them Individual coverage to supplement their group coverage, Use our DI express program.  Schedule here to learn how.

LET ME HELP YOU DIRVE YOUR DI BUSINESS, GIVE ME A CALL TO TODAY AT 512-680-6851 OR SCHEUDLE A TIME HERE.

Marketing in the new digital environment


On April 14th you heard from three fantastic speakers about how they have built their practices in the virtual world.  There are many things you can do to run a practice in the virtual world.
First, understand what resources your company has for you and your practice.  You will want to utilize those first, and then build form there.  Second, assess your practice.  Not everyone will want to meet virtually for many reasons.  Understand what they want to do, and adjust your practice to that.  Third identify your prospects and how they want to meet you and interact with you.
I work a lot with small business owners and millennials.  These individuals like to find things on their own and on their own time.  Whether it be through groups they are involved in, their own research, or through referrals.  Understanding where people will be, will help you in the digital world.
Here is my detailed strategy for marketing.  Understand that you may have to clear some or all of this with your compliance department, and that you may have to adjust it to your practice:

1. Daily, write a post about something, most recently I wrote a post asking for people to vote on my puppies for cute puppy contest.  This can be business or personal, or musings, but be direct about it, and make it a tie in to what you do.  I call my puppies my coworkers, and said help my office become an award winning office.  This draws people to you.
2. Record 1-2 minute videos directly on linked n about a topic.  I make my topics about working with teams, and building a practice.
3. Record longer videos, these I have to get approved through compliance, about important topics.
4. Reach out to people I am connected to daily, and have conversations about things they are doing.
5. Search for people that fit my ideal profile on Linked In, and connect with them and build relationships
6. Keep it going

I do use static posts as well, but have found that the more dynamic I can be and interactive the better success.  I also use a calendar to make sure that I am consistent with everything.  Building a calendar of consistency is extremely important and building the demand people want.

​What makes a customer a client?  What make someone that has never met you, or even may know you for a while, want to work with you?  How do you find the right clients, and find the people that you want to work with?
 
Many advisors/agents have asked themselves these questions but they are doing nothing about it.  Maybe they are following the same old process, or no process at all.  The world is changing, and we need to adapt.
  
I think the best way to build a client base is to have a proven process. Through a lot of trial and tribulation, I have developed a 7 step process that can be adapted and can be used to grow your business.  While I have used this in an advisory practice it can be used in any practice or business. 
 
The following briefly illustrates each step:
 
The 7 Step Client Acquisition Process:

1.    Initial Contact- The key to the initial contact is to "Create the Puzzle Picture" for maximum results. You want to make sure that you have an effective way to explain your message and help the prospect see why they should want to listen.
 
2.    Needs Assessment- Finding the need and filling it is an important step in the process because without it you are no different than any other financial advisor who is calling. You must show your value by uncovering problems and presenting solutions. This is about identifying the different puzzle pieces and creating a picture in your mind of how those pieces will fit together.
 
3.    Setting and Reconfirming the Appointment-Setting the appointment comes down to simply asking for the order. Prospects are notorious for setting an appointment and not showing up! You need to on the first call identify the puzzle pieces and how you can help them, then in confirming and follow-up bring them back to those puzzle pieces, and that you can put them together.
 
4.    The 1st Appointment- Now that you have the first appointment it is crucial to make a good connection with the prospect. People tend to work with people they like, and people tend to like people who are like them.
 
5.    Book the next Appointment- Always book the next appointment, before you end the appointment.  Have a set confirmation process like in #3 and connect the puzzle pieces and the solutions you have described.
 
6.The next Appointment- If you have made it this far, it is time to  
       close the prospect. And get referrals. Most advisors think that closing the sale ends with the second appointment but they are missing a very important step which is continuing the prospecting process by asking for referrals.
 
7. Client Servicing-Client Servicing can make or break your          
       business. It is easier to keep a client than get new clients, so need to have a service system to keep people involved.
 
You do need to use a CRM and keep track of everyone, but this is part of the process.

​ 
In today’s ever changing world certainty is extremely important.  When it comes to portfolio diversification, certainty is even more important.  Notice I did not say guaranteed, even though what I will be talking about today is a guaranty strategy, we are looking more for certainty with investments and portfolio diversification.  I have talked about in previous articles and I will discuss in future articles life insurance as an asset class.  Dick Weber did the research on this showing how in a randomized experiment at a max funding of a 40 year old male preferred non tobacco at 5.15% only 97% of the time did an Indexed Universal life last over age 100.  Many people in the insurance industry state that a permanent plan is there to help protect against not knowing when one is going to die.  That is why I take Life Insurance as An Asset class to a higher plane and feel it can be used in many situations and utilizing an indexed universal life policy along with a whole life or guaranteed universal life, if you are only looking for death benefit, along with term is a good diversification of the insurance solution.
Today I want to go a little further.  In today’s environment, investors are often looking for certainty from their investments, but by doing so they give up something, whether it be liquidity, return or tax treatment.  What if I could show you a strategy that may not be completely liquid today but has certain returns and could be a replacement to a bond or unused cash portfolio?  This is where the 10 pay strategy comes into play.  There are two companies, open to the independent world, which do this strategy really well.  There are multiple ways this can be done, through an immediate annuity paying premiums, a premium deposit account, or manually, all the ways you are using a 10 pay life policy, and the premiums are amortized out over 10 years.  You earn money on the lump sum and in the cash value of the policy.  You also start getting certain returns based on dividend scales and it develops into a larger opportunity for you.  The money is also liquid, although you forfeit interest return in the PPIA, the SPIA is more locked but you are getting a set return as well.  Both strategies work it just depends on what you and your client want to accomplish.
 
To learn more check out the podcast page at www.solveurpuzzles.com, or give me a call at 512-428-4145 to discuss.

4 Deadly Advisor Sins
 

 
In the day to day world of financial advising and insurance sales there appear to be many mistakes that are made.  One that has beocme very popular as of late has been that of huberis.  You see many advisors getting punished for being to greedy and too cocky and pulling scams on their clients.  In the general scheme of things these afvisors are a minor part of the advisor community but they put a large black stain on our community in general and make the public distrust us even more.  However, there are four sins that we do everyday that are much worse but just not as publicised as their immediate cause and effect are not as eggregious or obvious as embezzlement but they are still tragic.
The four deadly sins are:

• Assumptions: To get through case design practices and to see the number of clients we need to do to acomplish our goals, we often make assumptions.  These might be right and they moght be wrong but they are done with good intent to move the scenario along.  The problem with assumptions is they may be based on facts but are they based on all the facts.  Slow down and take your time and find the right needs for the clients.
• Cookie Cutter Approach:  Just like assumptions, cookie cutter approach is done to save time.  Too often advisors recommend the same product mix for every client of the same circumstances.  The problem here is that one might miss nuances.  It is easier to provide a cookie cutter approach to clients, but not always right.  Take your time and slow down.  Take a look at each client and figure out where it needs to be.
• Do it Myself Approach:  We are supposed to be the experts.  As advisors we are the resource but we can’t know it all.  Team up with people to learn more and figure things out.  You don’t have to do it yourself you can team up
• Analysis Paralysis:  This is the most common problem for advisors.  We can get too caight up in the analysis.  This is where having a team that you can talk with and help do objective analysis to create the right decisions for the client.

Really simply, it is about taking your time and finding the right tools to help you and your clients.
 
Rodney Mogen, is the president of solveurpuzzles, a business focused company.  Helping Financial advisors and insurance agents solve their case troubles and issues.  Rodney is also a small business advisor focused on developing financial strategies for small business owners and helping them develop their own strategy and ideas to grow, sell, develop the way they want.  He is focused on creating proper financial strategies for Advisors and business owners to assist them in their day to day duties by solving their financial puzzles.  Rodney is also the Director of Financial Strategy for The Evans Group.  Check out more information at www.solvurpuzzles.com and the financial strategy work for The Evans Group at www.financialselectservices.com.
​

​What does Disability Awareness mean to you?
 
May is Disability Insurance Awareness Month or DIAM.  What does Disability awareness mean to you? Awareness might mean different things to different individuals.  As an adviser disability insurance is not something often talked about.  When compared to life insurance and even long term care, individual disability insurance and subsequent products are not discussed or presented to clients as much as they should.  Awareness comes in three parts, 1 educating ourselves, 2. Educating our clients, 3. Being able to understand the companies and their languages
Think about when you last presented an individual disability policy?  In my seminars and webinars I always ask who has presented an individual disability policy in the last month, 90 days, and 6 months, usually in a room of 20 or more 1 – 2 agents raise their hand for 6 months, 1 for 90 days and usually zero for last 30 days.  Thus, awareness needs to start with us, the agents.
I am focusing on individual disability insurance because a lot of workers have group insurance available, although a recent study by LIMRA from 2019, shows that less than 3% of all eligible workers have either group or individual disability coverage, and less than 1% have proper coverage they need. 
With DIAM coming up in MAY, what are you doing to talk to your clients about their income protection?  Some of you may not have a practice where you work with working age individuals, but those that do should be having this discussion.  The second part is educating our clients about their current plans and their missed opportunities. 
There are a lot of ways to do this but simply changing the language from disability to income protection seems to be more effective and clients more willing to listen.  Making clients aware of the difference in language between an individual contract and their group contracts, as well as some of the limitations their groups contracts might have is important.
Finally, the third part of awareness can be the most difficult.  There are not as many Di companies out there as there used to be, but there are still several.  Each one has different types of contracts, pricing, and the language in those contracts can be different as well.  Thus there is a lot of work to look at and find the right contract for your client.  Lets strive in May and before May to be come aware of Disability insurance and identify how we can help make our clients aware as well.
 
If you have any questions or I can be of assistance to point you to some resources, please reach out to me at 512-680-6851 or rodney@solveurpuzzles.com