Financial products have expense loads, declared and undeclared. In this the information age with a little Sherlock Holmes savvy and access to the Internet you should be able to uncover what the manufacturer should disclose. But, for the most part, it’s not disclosed. Mutual funds and ETFs (Electronically Traded Funds) have their expense ratio disclosed in their prospectus, but other fund related costs are embedded in other documents and not generally disseminated to the fund owner. The average expense ratio for small to large cap funds is around 1.30%, foreign stock funds around 1.50%, and bond funds near .90%. The average Registered Investment Advisor charges an annual fee around 1.03%. Based on public information disclosed in the prospectus and the RIA ADV form, most investors think they’re paying under 2.5% all in. But in reality, there’s an average of an additional 1.33% listed in the statement of additional information which is available to anyone online, but not delivered as part of the fund cost. These transactional costs are not cheap and most fund owners are not aware of them, and shockingly neither are most of the registered representatives and RIAs that sell them. Cash Drag is another additional cost in   Read more…

Risk tolerance is the measure of how much risk you can handle as an investor. It may help determine what you can afford to lose, the time frame you have remaining to reach your goal and your emotional ability to handle risk. Risk tolerance changes over time, too. Whether you’re investing conservatively, moderately or aggressively, age, income and circumstance all form your current level of tolerance. It’s always wise to reevaluate your risk tolerance to ensure as your risk tolerance changes, your portfolio reflects those changes as well. This is where many investors—and advisors—may fall short. Reevaluating as your life changes is imperative.  The Red Zone for Baby Boomers. The decade of danger lies in the five years before and after your retirement date. Market corrections, bear markets, Black Swan events and sideways markets can side line your retirement dreams and turn them into a nightmare. So it’s important to have a retirement game plan and an audible or two in your back pocket to back up your plan in case life hands you a setback. The world has changed. Globalization has made the planet smaller. Everything is correlated, so it’s hard to escape the gravity of the global impact   Read more…

To generate a tax-free income stream from cash value life insurance a few major caveats need to be in place. First any cash value policy needs to be designed to comply with the TAMRA regulations that address guideline or cash value accumulation tests. Secondly, the policy must remain in force for the life of the policy insured. If the policy were to lapse or terminate for any reason, the policy loans of gain and the unpaid interest on those loans would be characterized as phantom income and taxed as ordinary income in the policy owners tax bracket. IUL uses the earnings from the indices credited to the policy. Those indices can be domestic, as well as foreign to generate interest rate returns. Policy owners don’t participate in dividends, but they also don’t participate in the negative returns of the policy indices, i.e. zero is the lowest crediting rate in the crediting account. That being said, the policy expense loads in a zero year could generate a negative return. These types of polices are for conservative to moderate investors with long time horizons. Compliant IUL withdrawals to basis and policy loans of gain have the potential of generating tax free distributions   Read more…

The vast majority of seniors need every last dime of their money to enjoy their golden years. Medical and long-term care costs are significant over a lifetime, it doesn’t compare to the accumulated taxes paid over a lifetime. We need to manage both our health and wealth. Part of managing your wealth is managing your taxes and it’s a worthwhile endeavor to learn how to do it. It’s possible that many retirees may be able to generate 10-15% more income by just managing their taxes. And there’s no place better to start than Social Security income. Social Security attracts taxable income like a magnet. With the exception of HSA Accounts, Roth IRAs, Reverse Mortgages and Cash Value Life Insurance, everything falls prey to the provisional income test. Even items you would never consider like municipal bond income or capital gains of non qualified mutual funds or ETFs. Qualified retirement funds are the biggest contributor to Social Security taxation of all income sources. Keep in mind that a qualified plan has no basis, so it’s all taxable. And although you can delay taking distributions from your qualified plan until age 70½, you’re forced to take required minimum distributions (RMDs), which directly   Read more…

Cash Value Life Insurance designed as a Non Modified Endowment Contract (non MEC) can generate tax-free collateralized policy loans and withdrawal of basis tax-free as long as the policy is kept in force for the life of the policy insured. Therefore cash value life insurance in this scenario is a life-long buy and hold position, beyond the traditional long-term horizon timeline. There are four types of cash value policies to choose from based on your risk tolerance and product suitability for your financial goals: Participating Whole life, Universal Life, Indexed Universal Life and Variable Universal Life. The crediting methods for each policy type have advantages and drawbacks. You should seek out an insurance professional who understands the rules of engagement to generate tax- free income from these types of cash value polices. Home Equity Conversion Mortgage (HECM) is an FHA insured HUD program for seniors over age 62. HECM has several options to choose from in using home equity. One of those options is tax-free income from collateralized equity loans from your home, which can generate a lump sum or an annual payout. The payout schedule can be for a limited time as an income strategy to delay Social Security   Read more…

Third party referrals are very cost effective if you can convert the relationship you have in common with each other. But referrals may not easily join your sales field force because they didn’t undergo the same 5 step recruitment process as the recruit who referred them to you. Skipping the process leads to lower conversions, so don’t break formula. Asking for a referral is actually a continuation of the close. Take the opportunity to once again review what you have accomplished – build the relationship. Obtaining referrals is a measurement of how good a job you have done. Thank the agent for permitting you to serve them! Don’t rush through this step. Your future production will reflect how good a job you did in this area. Great marketers who leave their downline agents with a positive experience often receive referrals without even having to ask. A satisfied agent may readily wish to give you friends’ and family members’ contact information. Referrals perpetuate your business. Don’t forget to follow-up and follow-up. One of the biggest lessons learned over the years is that referrals are not of the same value as nominations. How can you increase your value in the financial professional   Read more…

When does a suitor, who is in love, know when to pop the question? Is it time to close the deal? If timing is everything, what do you know about time. One aspect of the pre-close is alignment. If your car is out of alignment, it doesn’t run right. And there’s no reason to continue in that condition because the “ride” will only get worse. On the other hand, if the alignment is right and everything leading up to the close is firing on all cylinders, then the close is close. In some cases you may need to address a hire on a timeline format: The first 90 days, a year out and three years into the future. At each point on the timeline you need to establish and clarify production benchmarks for your company and milestone markers for your recruit. If you can’t monitor it, you can’t quantify it. And if you can’t quantify it, your accounts receivable won’t confirm that you made a good hire.  Too often, organizations manage their field force with revenue check points only, without offering training and education. It can’t be underscored enough, that education and training within an organization is a human resource   Read more…

Even since the tower of Babel, the human race has attempted communication with each other. No presentation worth the light of day can be crafted without knowing your audience and the language they use. Target marketing is the art of demographics, but it’s all for naught if you are using the wrong dialect to communicate your value proposition. It may be very helpful to conduct a presentation with a group of established agents to confirm your approach and ensure the language you’re using is correct. If you’re using power point presentations the axiom is “less is more,” with more background space. Use colors that are easy to read and a font size that those who occupy the back row can read. If you use video, use vignettes which are short snippets of 30 to 60 second clips. Make sure your talking points are pithy and concise. Your oral communication can be more explanatory. FYI… wordiness can also be a trap to fill the time slot, so factor in what you need and no more. Large wholesale companies love to tout their product and carrier inventories to impress new recruits and marginalize their competitors. But the vast majority of agents use   Read more…

An important distinction between a seasoned veteran and a rookie is the recruit’s knowledge base and the length of time it will take for them to generate revenue. There’s a point of diminishing returns where you need to terminate the relationship, review your hiring practices and make adjustments to the recruiting process. There’s a key characteristic among financial professionals that you’re searching for. Is the potential recruit a producer, i.e. a revenue generator? Is the recruit more than a professional student? The financial industry is overrun with academics who pontificate on their knowledge but are incapable of producing revenue. It is possible that a knowledgeable person could be a team member for support, but not for revenue. Lead junkies are first and foremost looking for free leads. They’re not concerned with your acquisition cost, they believe that you owe them free prospects. And even if they are willing to pay for leads, your cost to generate them may outweigh the overrides you receive from their sales efforts. Anyone who has ever presented a dinner seminar or workshop has run into professional plate lickers, attendees whose mission in life is to exploit your practice for free food and education. It’s actually   Read more…

There are several recruiting methods deployed by head hunters, employment firms and referral networks. Whether it’s the military enlistment, college enrollment or a dating site, they all have algorithms and sorting approaches to their filtering systems. Many companies have best practices and established recruiting cycles to ferret out the general population or specific industry. But they all have one thing in common and that is consistent contact through online advertisements, social media campaigns and direct mail pieces. In the financial services industry, first contact with a potential insurance agent and/or registered representative is generally through email blasts or phone calls. Recruitment activity is based on the theory of large numbers. Often good recruiters are making 200 calls a day to generate 12-15 contacts that fall within the parameters of the company’s search criteria. Hopefully two or three of those contacts have the basic qualifications to move forward for a second conversation. The value proposition of the company needs to be direct, pithy and to the point. A well-defined and well-crafted proposition can increase the ratio of potential candidates. Most firms have an ideal candidate in mind. Not all recruits fit that ideal profile, but some may have the potential to   Read more…