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“I Gotta Guy/Gal” calls and inquiries are our stock and trade at AgencyONE! As you know, every case is different both medically and financially, so we need to do a LOT of due diligence work to provide prudent advice. Upon receipt of ANY new inquiry, it is VERY important that we consider all options, not just new life insurance coverage. Does an opportunity exist for conversion? Could the client potentially apply for a rating reduction on their existing policy? Is a life settlement an appropriate action to take? A client’s health and financial circumstances can change at any time. With that in mind, the AgencyONE Team is equipped with the knowledge and resources to assist you and your client through whichever path they decide to take. 

This ONE Idea will explore various options for your “I Gotta Guy/Gal” and discuss 2 recent case studies. 

Option 1 – New Coverage 

The good news is that COVID restrictive underwriting is gone, for the most part, and the pendulum has swung to a much more aggressive underwriting position with several of our carrier partners. Lifestyle and health style underwriting credits ARE BACK! While you MAY refer to them as TABLE SHAVES, the carriers and reinsurers don’t call them that. So, our AgencyONE 100 advisors SHOULD look at the mildly substandard cases from a few years ago AGAIN.  There are some VERY strong NEW product solutions now available with longer guarantees coupled with GREAT UNDERWRITING! 

Option 2 – Rating Reduction

We are often asked to review cases for rating reduction considerations and are happy to do so, but generally, these situations require FULL UNDERWRITING again. With newer product solutions and more options for clients to choose from, a successful rating reduction request can often result in NEW COVERAGE or ADDITIONAL coverage being accepted. The possible addition of a Long-Term Care Rider is an important example. 

Option 3 – Conversion 

This one can be tricky as many carriers are now limiting conversion options to certain product lines in the near term with a limited product solution line option for later conversion years. Our AgencyONE 100 Advisors MUST pay close attention to the conversion year options of their clients’ existing inforce term policies.

Option 4 – Life Settlement

This should be considered a very real and viable option for ANY client who is over age 70 and has an existing policy. Life settlement valuations are based upon life expectancy calculations which factor in the client’s health and anticipated year and age of death. In general, the older the client, the shorter the life expectancy.

Case Example Mr. Smith – Life Settlement 

Our first client, Mr. Smith, is 73 years old. We previously underwrote and negotiated a STANDARD issue a few years ago. We issued and placed in force two permanent policies. Recently, Mr. Smith advised that due to changing financial circumstances, he is unable to afford the premiums going forward and wants to consider other OPTIONS for his existing policies. 

Mr. Smith was underwritten for a $3 million business policy need and a $1 million personal insurance need at age 69. His compensation the previous year was over $500,000 so premium payments were not considered prohibitive. However, the business became wrapped up in litigation 2 years ago with our client as the plaintiff. At age 73, Mr. Smith’s health status has worsened to the point that new underwriting would not be a consideration. He is looking for options to reduce the premium payment while trying to maintain protection. A Life Settlement of the smaller $1 million contract will free up enough cash flow to help him maintain the existing $3 million of permanent inforce coverage for at least several more years while his litigation moves forward.   

Case Example Mr. Jones – Rate Reduction Term/Conversion to Perm 

Our second client, Mr. Jones, came to AgencyONE when his policy was in the Grace Period of its term conversion. He wanted to maintain coverage but did NOT want to pay the exorbitant term premium at the conclusion of the term and wanted to convert to a permanent policy. If we could provide NEW evidence of insurability, we could take advantage of the new table shave/crediting underwriting and rider considerations. After an AgencyONE Informal Inquiry was filled out and a HIPAA signed, medical records were gathered, the exam and labs were completed, and the rating reduction request was submitted. It was determined that Mr. Jones’s health status had IMPROVED since underwriting the initial term policy. The rating reduction was GRANTED AFTER some important negotiations by AgencyONE. The conversion form was submitted to our carrier partner and the case was paid for THIS WEEK. The client is ecstatic and so is our AgencyONE 100 advisor!

AgencyONE works diligently to advocate on behalf of your clients. We encourage you to take the time to review inforce policies for the possibility of new coverage, rating reductions, conversions, or life settlements. This is an opportunity for you to possibly improve your clients’ inforce coverage AND perhaps increase your Q4 business. 

Please contact the AgencyONE Underwriting Department at 301.803.7500 for more information or to discuss a case!

AgencyONE is often approached by advisors who want to discuss premium financing. The conversations usually fall into two separate categories – the financing transaction has not yet happened OR it is already in place. When the transaction has not yet happened, this is an “easy” conversation. These advisors typically want to present financing options to their client OR their client has approached them with a financing transaction that was presented by a competitor that seems “too good to be true” and they would like AgencyONE to review the proposal. When the financing is already in place and AgencyONE is approached, typically there are issues for the client and/or the advisor!  The client is unhappy, the advisor is “concerned”, and/or the advisor is trying to “fix” a problem for a potential client or a valued referral source. But what could have gone wrong? Well – a LOT! 

On September 11, 2020, I wrote Premium Financing Life Insurance – What Can Go Wrong? At that time, the US Prime Rate was 3.25% and the one-year LIBOR rate was just south of .40%. The S&P Index had returned 28.88% in 2019 and ended up delivering 16.26% by the end of 2020 and another 26.89% in 2021.

It is no surprise that the Premium Finance market was booming during that time. Cheap money was available, and the equity markets were on a tear. Index Universal Life, the product of choice for many promoters of financing premiums, dominated life insurance product sales in 2019 with a record year at $2.3BB in premium, up 14.6% from the prior year, according to Wink Intel. I would venture to guess that premium financing helped fuel some of that growth.

Premium Finance loans in 2020 were being extended to clients, typically, at one year LIBOR plus a spread of around 150-200 basis points. Insurance buyers looking to finance premiums could borrow premiums at 1.9% to 2.4% and leave their money in the bull market, furthering their gains by paying a low-interest rate on borrowed funds that would benefit from gains in an IUL Index, creating positive arbitrage. Not a bad plan, but as I said in my previous article – what could go wrong?

Fast forward to today and last year: the S&P 500 was down over 19% in 2022, the prime rate is now at 8.5%, and one-year LIBOR which no longer exists, was at around 5.85% as last reported in June of 2023. People who had entered premium finance arrangements got hit with a few things at once:

1. Many of the maturing index segments (options) in their IUL policies earned ZERO return, due to negative market index returns in the indices they were tied to. While they did not have negative returns in the index segment itself, because of the way IUL works, many did, in fact, see their cash value decline because of contract expenses (cost of insurance, administrative expenses, loads, etc.) and because they had selected index options that promised higher returns but had an additional charge for performance enhancements which was deducted from the cash value, even with a ZERO return.
2. Because in a premium financing arrangement, the cash value of the policy is used as partial collateral, with the balance of the collateral being posted by the owner of the policy in cash or other marketable securities (money markets or other short-term securities), declines in policy values because of #1 above created collateral calls by the lending institution. Many policy owners had to produce more cash or securities to shore up their collateral position.
3. Finally, as loans were renewed, the interest expense to the customers almost tripled from 1.9%-2.4% to over 7%. Imagine entering a $1,000,000 loan at the end of 2020 which required $20,000 (or thereabout) in interest payments, increasing to over $70,000 in 2023, assuming no further premiums were borrowed. Most premium finance transactions are multiple loans for premiums over multiple years, adding to the loan balance due to the financing institution.

I am not, for one second, suggesting that premium finance arrangements will not work or should be terminated, but at a minimum, they should be reviewed periodically to make sure that the long-term objectives of the policy owner, be it a business, an individual or a trust, are still being met. A few years of negative star alignment should not impact the long-term nature of some of the planning that was accomplished through the creation of trusts, the purchase of insurance and the financing of the premiums. However, some policy owners are no longer able to continue these transactions or choose to not continue them.

The market is replete with problematic premium financing transactions. AgencyONE is frequently called upon by advisors to discuss cases where collateral calls, well into the six and seven figures, were/are required. Most recently, we reviewed a transaction where the insured\policy owner, who had been paying around $20,000 per month in interest expense, saw that number more than double to over $50,000 per month. These sorts of situations require review.

If you have a client who has called you to discuss a life insurance premium financing transaction that is no longer financially attractive or feasible for the insured/owner to keep in place, or if you are concerned about your client’s life insurance portfolio, there may be a solution. But the time to act is NOW because the current financial climate does not appear to be getting any more favorable for individuals who are looking to finance life insurance premiums with OPM.

Planning strategies can be implemented to alleviate the burden of these transactions while still meeting some of the long-term planning objectives of the original transaction structure, and AgencyONE can help.

Our knowledge, experience, and analytics capabilities, in addition to our advanced planning expertise, can provide a multitude of solutions to your clients. When life insurance premium financing transactions are already in place, these services are provided on a fee-for-service consultative basis.

Please call the AgencyONE Marketing Department at 301.803.7500 for

more information or to discuss a case. 

Countless articles exist about Cash Value Life Insurance and how it can offer supplemental income for your clients. AgencyONE has even written some – Cash Value Life Insurance, the Gift that Keeps Giving. While these articles are great at focusing on accumulation and future projected income, some forget about the protection aspect of the life insurance equation altogether. For accumulation, income, AND protection designs to be successful, you must FIRST determine your client’s insurance need. This important first step will help AgencyONE design a protection plan that allows your clients to protect what matters most to them. Additionally, in the event of an early death, the proceeds can fully fund the accumulation goal while traditional investments cannot. The insurance need may dictate a specific or a minimum Non-MEC (Modified Endowment Contract) premium level to assist in maximizing the cash value. The overall case can be built with Whole Life, Indexed Universal Life (IUL), Variable Universal Life (VUL) and/or Term. A well-designed life insurance program can utilize multiple product lines simultaneously. 

A Multiple Insurance Solution Design

After you determine the protection aspect of the policy for your client, you will next explore the accumulation options. A common objection from clients about cash accumulation designs is that they can realize better returns through their investment account. This may or may not be true depending on the design of the policy, the client’s goals, and the portfolio allocation of the client’s account. Instead of just talking about the comparison – AgencyONE can provide a report which shows a side-by-side method for comparing and contrasting these options. We can run scenarios based on the desired projected income stream from the policy and customize the compared investment account for:

• Composition;
• Rate of return; and
• Projected tax rates.

It is important to remember that the life policy distributes the values tax free while the equity account has annual taxable amounts due and a higher distribution requirement to match the net life insurance distribution. This report will include the taxable amounts during the accumulation and distribution phases.

Sample Reports

Let’s look at the first of two sample reports. Both use a 39-year-old male client with a preferred rating. Mr. Male Client wants to contribute $50,000 per year for 10 years and then take an income stream for 10 years from ages 65-74. The AgencyONE Case Design team ran this report with two different product solutions – Whole Life and IUL. For purposes of comparison, the investment account options will remain constant with a:

• 6.5% ROR (4.5% Equity Account Growth and 2% Equity Account Dividend);
• 35% Tax Rate;
• 15% Portfolio Turnover Rate; and
• Management Fee of .75%.

Comparison 1: Using a 10 pay Whole Life Contract vs an Equity Account

The first three columns show the Equity Account. (Annual Deposit, After-Tax Income, and Year-End Account Value). Columns 4-8 show the life product (Premium, After-Tax Loan Proceeds, Cash Value Increase, Year-End Cash Value and Death Benefit). Whole Life provides an immediate initial death benefit of $1,313,504 which far exceeds the accumulated benefit of $52,401 in the Equity Account in year one. The Whole Life solution is run using the carrier’s current dividend rate and solves for the 10 years of income starting at age 65. Even with the exact projected rates and returns on this report, the Death Benefit of the Whole Life product exceeds the accumulated value of the Equity Account in year 30 by $454,598 and the projected income solve (withdrawal to basis then loans) from the Whole Life is $121,944 per year!

On the second page of the report below, we see that both options can continue at the projected rates after the income period is complete. The Equity Account will exceed the Death Benefit of the Whole Life around age 95. 

This report is ideal for explaining the concept to your clients, but the important selling point should be the higher initial death benefit and tax-free growth that the design offers! The rates in this report are constant and do not reflect changes in performance and dividend rates. Key items to note on the Whole Life product are that:

1. It is based on current dividends; and
2. The policy must be managed to stay inforce to prevent a taxable issue at lapse.

See the full report showing taxable amounts in the Equity Account.

Comparison 2: Using a 10 pay Accumulation Based Index Product

The sample design above uses an Accumulation IUL solution with a Death Benefit run at a minimum Non-MEC level showing an increasing option B for 10 years. In year 11 we switch to level. Similar to the Whole Life contract we show an initial Death Benefit of $1,009,401 compared to the $52,401 accumulated benefit in the Equity Account. The projected income taken from the Indexed UL is $143,064 per year (withdrawal to basis then loans). 

The second page of the report below shows a different result compared to the Whole Life option. Since the IUL income solve is higher, your client would need to take more from the Equity Account to match the net number from the life insurance.  In this scenario the Equity Account runs out of money in year 35 while the IUL continues under the 5% ROR. See the full report showing the taxable amounts in the Equity Account.

Indexed UL is a good option for you and your client to consider but it should not be chosen JUST based on the higher projected income solve. This product has a fixed 0% floor and a high par rate that can fluctuate based on how a carrier adjusts them over time. These are hypothetical projections based on the same rate of return every year which will NEVER happen. It is imperative that you and your client fully understand how this product credits and performs – especially as compared to the Equity Account. The strengths of the IUL are a fixed 0% floor and the option to take tax-free income. Please be aware – that the amount of income may need to be adjusted over time AND additional premiums may be needed to keep the contract inforce.

This ONE Idea is not meant to rate one product over another when comparing against the Equity Account. However, it is meant to provide you with an effective way to show your clients the benefits of tax-free income and how they might have another income source in addition to their other current options. Depending on your clients’ objectives and risk tolerance, AgencyONE has numerous solutions to plug into these comparisons. Our Case Design team will help you select the best options for your client. Please review the full comparisons we have attached and look at additional rates to compare and review the cost of insurance pages to ensure you have all the information you need for your client presentation.

Please contact the AgencyONE Case Design Department at 301.803.7500 for more information or to discuss a case.

If you’d like to read more of our ONE Ideas, you can find them on the homepage of our website under Updates/Blog or under the Sales & Marketing tab on your personal advisor Dashboard.

Happy August! We hope you have been having an enjoyable summer and had the opportunity to “get away” with family and friends for some R&R.

During the month of August, AgencyONE’s weekly ONE Idea will be on hiatus. Don’t worry though–we’ll be back in September with new articles that discuss a range of important topics in Advanced Markets, Underwriting, and Case Design.

Until our ONE Ideas return next month, check out the list below to navigate to those from the past 7 months!

Underwriting

• Reinsurance DIRECT Underwriting: A Strategic New Approach – Feb 7
• PLEASE…DRINK THE WATER Or It’s Going to Cost You! – Mar 10
• Atrial Fibrillation – Part II: Understanding the Treatment Options – July 13
• A Look Back & A Look Ahead – Feb 22

Case Design & Product Intelligence

• New Year, New Options for Term Conversions, Policy Review & Supplemental Perm Coverage – Jan 18
• Top Tier Case Design – A 1035 Exchange with an Internal Split – April 21
• Presentation Options to Help Close Your Next Case – May 23

Annuities

• $2,000,000,000,000 – 2 Trillion Dollars! – Mar 24
• QLAC: A Strategy to Reduce Your Clients’ Taxes – June 21

Retirement, Estate & Tax Planning

• Sunrise or Sunset? – April 14
• Variable Life Insurance as an Alternative to a 401K – July 25

Practice Management & Marketing

• Got FOMO? What You Missed at the 2023 Annual Advisor Conference – May 12
• Planning Opportunities & How Collaboration Can Increase Your Sales – June 13

All of our most recent ONE Ideas are housed in the “Blog” section on our website under the “Updates” tab on our homepage. You can also find our complete library of categorized ONE Ideas on your “Advisor Dashboard” under the “Sales & Marketing” drop-down. We hope that you find our articles enlightening and that they bring you at least ONE idea!

Keep an eye out for more information on other AgencyONE news, and remember that your AgencyONE Team is always here to help! Do not hesitate to contact AgencyONE’s Marketing Department at 301.803.7500 for more information or to discuss a case.


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We hope this recap finds you and your family well, that you are enjoying the summer and getting plenty of time to relax, refresh and generally unwind. The summer is half over and our busy time of the year is right around the corner, and we can’t wait (really!). A good summer vacation refuel goes a long way in getting all of us ready for the Q4 sprint that will be here before we know it.

We are pleased to share our July ONE Idea Recap with links to the full copy of each ONE Idea from this month. AgencyONE’s ONE Ideas are designed to discuss a range of industry topics that align with current trends in Advanced Markets, Case Design, and Underwriting. We hope they bring you and your practice value and at least ONE idea!

We started the month of July with a ONE Idea from our underwriting team titled Atrial Fibrillation – Part II: Understanding the Treatment Options. One (1) out of every seven (7) strokes are attributed to undiagnosed and/or untreated atrial fibrillation. Known as AFib, it is the most common kind of heart arrhythmia in the world. This ONE Idea is a follow-up to an earlier article and discusses the definition, causes and symptoms of atrial fibrillation, along with existing and newer treatments that have become available recently. It also outlines what underwriters look for when evaluating a case that presents with AFib and an actual AgencyONE case study that demonstrates how important preliminary underwriting and advisor involvement are to the successful outcome of a case.

Our second ONE Idea this month came from the desk of Gonzalo M. Garcia, CLU and was titled Variable Life Insurance as an Alternative to a 401K. Gonzalo was inspired to write this ONE Idea as a result of a Motley Fool article he read that discussed Roth IRAs and why investors should consider them. While Roths may be the right solution for some, Gonzalo points out that Roths have limited applications for many and, even if someone DOES qualify, contribution amounts have strict limits. Additionally, Gonzalo notes that the Motley Fool article does not include an IMPORTANT and viable alternative for investors who do NOT qualify for a Roth – a Variable Life Insurance solution. Gonzalo dives into the specifics about how a well-designed Variable Life policy offers the same benefits, possibly better, than a Roth IRA (doesn’t have Modified Adjusted Gross Income (MAGI) or contribution limits and offers real tax benefits). Unfortunately, there is a lot of misconception and ignorance surrounding Variable Universal Life that prevents it from being utilized in situations where it would be appropriate. This article discusses a great planning solution for you to consider for your clients and to pass on to the Centers of Influence with whom you collaborate.

Our most recent ONE Ideas are listed under “Updates” on our website homepage. Additionally, a full library exists on your personal Dashboard on our website under the Sales/Marketing tab (you are required to have a website login for access to the complete library). If you see something you like, we can brand it for your company and make it client-facing, if necessary. Just let us know.

AgencyONE provides these ONE Ideas to help you and your clients gain a better understanding of the planning, product selection, design, and underwriting that goes into the purchase of life insurance (with and without linked benefits), annuities and disability insurance. We hope you find these ONE Ideas helpful when assisting your clients with their financial, wealth, business, and estate planning needs.


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The Motley Fool Embraces the Use of Variable Life Insurance as an Alternative to a 401K – well, not really.

In a recent article in The Motley Fool dated July 2, 2023 entitled The No-Brainer Retirement Account that I’d Choose Way Before a 401K , Justin Pope INADVERTANTLY makes a strong case for why a well-structured Variable Universal Life policy is an attractive alternative to a 401K Plan. His “Key Points” are listed below:

Nearly one out of every seven strokes in this country are attributed to undiagnosed and/or untreated chronic atrial fibrillation or complications that arise from the condition. We have written about AFib before and because cases continue to come across our desks at AgencyONE, we thought it time to offer an update to a previously penned ONE Idea entitled Underwriting Atrial Fibrillation. A lot has happened in our world since our last article, but one thing has not changed – atrial fibrillation remains the MOST common kind of heart arrhythmia worldwide. The CDC estimates that by 2030 12.1 million people will suffer from AFib. This week’s ONE Idea will explore the treatments we see in underwriting and include a Case Study for the client of an AgencyONE 100 Advisor. 

Definition, Causes, & Symptoms of AFib

Atrial fibrillation (an abnormal and sometimes very fast heart rhythm – arrhythmia) occurs when the pacemaker center of the atrium (the SA node) gets short-circuited or overridden by other heart muscle cells that fire random electrical signals. This random firing causes the contractions of the neighboring heart muscle cells instead of the uniform contraction process, which pushes blood flow into the ventricle. The upper part of the heart becomes much less effective and the lower part of the heart, the left ventricle, must work harder.

AFib can be caused by chronic conditions such as ischemic heart disease and/or high blood pressure. It can also result from temporary conditions such as hyperthyroidism, pericarditis, thoracic surgery, and acute alcohol intoxication (aka “holiday heart”). Symptoms may include palpitations and shortness of breath, although some individuals experience no symptoms at all. Episodes of atrial fibrillation can be paroxysmal (comes and goes) or chronic. Over time, this can lead to heart failure. However, the most common and most life-threatening concern with atrial fibrillation is the high risk of STROKE. AFib MUST be treated to lower this life-threatening risk. 

There are a variety of treatment options available depending on the symptoms, underlying cause, and length of time with the condition. 

AFib Medications

Blood thinners (i.e., Warfarin) help to offset the risk of a stroke and in some individuals, anti-arrhythmic medications (i.e., Amiodarone) alone can bring the heart back to normal sinus rhythm. However, it is worth noting that the use of blood thinners carries its own risk. Besides the side effect of possible excessive bleeding, the use of blood thinners can cause fatigue, dizzy spells, weakness, and possible shortness of breath.

Electric CARDIOVERSION Treatment

During a cardioversion, low electrical shocks are delivered to the heart through two electrodes with the goal of resetting the heart rhythm. It is often used to remedy tachycardia (a heartbeat that is too fast) or fibrillation (an irregular heartbeat). For some, it may require more than one treatment to restore a regular heartbeat. From an underwriting standpoint, some carriers may require a short postponement period following a cardioversion to ensure the heart remains in a normal sinus rhythm for a period of time.

Ablation

If medications and cardioversion are not effective in treating AFib, the next approach is typically a minimally invasive procedure called an ablation. After cardiac “mapping” (an electrophysiology study) to pinpoint the source of the heart’s electrical misfiring, a catheter is threaded through a large blood vessel up into the heart. The catheter emits energy to destroy (ablate) the tissue that is causing the arrhythmia. An ablation is effective on the first attempt approximately 60% of the time. However, a second procedure can sometimes be required. Underwriters are again focused on TIME and stability AFTER the procedure. 

Although there can be great success with these more common forms of AFib treatment, some individuals still experience long-standing and persistent atrial fibrillation. This has led to the innovation of another treatment called the Hybrid Convergent procedure.

Hybrid Convergent Ablation

This relatively new treatment (clinical trial in 2020) is a two-step minimally invasive procedure designed to treat longstanding persistent atrial fibrillation – 70% of patients with AFib are considered to have this condition. The first step, performed by a cardiac surgeon, involves creating a small incision in the chest wall allowing access to the OUTSIDE of the heart muscle for atrial wall ablation. Step two (approximately 8 weeks after the first step) involves a catheter ablation to the INSIDE of the heart and is performed by an electrophysiologist. 

The Watchman

This alternative treatment is for individuals who cannot tolerate prolonged use of blood thinners which typically have been the only treatment used to eliminate blood clots. The Watchman is a small “parachute-shaped device” (not much larger than a quarter) which is inserted into the left atrial appendage (the specific area inside the atrium that is most prone to blood clot formation) to effectively close off the area. The device has been shown to be as effective in eliminating the risk of blood clots in the left atrial appendage as blood thinners. The Watchman can be used only for those with non-valvular atrial fibrillation. 

AgencyONE underwrites our Advisors’ cases based on the actuarial statistics and while atrial fibrillation is a rather common cardiac arrhythmia, it does require TIME to show that the prescribed treatments are working. At AgencyONE, we often work directly with the cardiologists to clarify patient records and perhaps offer additional testing options that may help carrier underwriters view these cases in the most favorable way.

Case Study

Mr. Elliott Thomas is a 59-year-old married man nearing retirement and hoping to secure a linked-benefit policy. He is sufficiently covered as far as traditional life products go but wants the additional reassurance that a linked-benefit policy can provide for himself and his family.

Mr. Thomas is 5’9” tall and weighs 200 pounds. He has a history of persistent atrial fibrillation which was initially treated with antiarrhythmic medication, but the treatment was not considered effective. Mr. Thomas underwent a successful cardioversion in June 2022. There was a discrepancy in Mr. Thomas’ medical records saying that he had required not one, but two cardioversions. The AgencyONE underwriting team reached out to Mr. Thomas’ physician directly for clarification. His physician responded to our team with a detailed letter confirming that the client required only ONE cardioversion, as we had expected. Mr. Thomas’ heart has remained in normal sinus rhythm since the procedure, and he has experienced no complications.

Aside from the atrial fibrillation history, Mr. Thomas has hypertension (well controlled on Lisinopril) and takes a statin as a preventive measure to keep his cholesterol at optimal levels. He has no history of coronary artery disease. Mr. Thomas is otherwise very healthy and engages in exercise three to four times a week (jogging, cycling, swimming, tennis).

Even with the atrial fibrillation history, Mr. Thomas successfully qualified for a very competitive linked-benefit product from one of our A+ carrier partners that provides a $5,000 per month LTC benefit which increases annually at three percent. Mr. Thomas was able to use a portion of a recent inheritance ($75,638.72) for an attractive single-pay scenario. The product is cash indemnity with benefits and premiums fully guaranteed.

AgencyONE’s Underwriting Team is equipped with the product intelligence and underwriting expertise to assist with ALL of your clients’ insurance needs. We are ready, willing, and able to help with matters of mortality AND morbidity!

Please contact the AgencyONE Underwriting Department at 301.803.7500 for more information or to discuss a case.

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June – the month summer starts, school ends, families go on vacation, weddings happen, and generally everything just “slows down” a bit. Well, things things did not slow down here at AgencyONE. We are gearing up for the start of the third quarter, successfully finishing out the first half of 2023, and planning great things to help fulfill the insurance and financial planning needs of our AgencyONE 100 advisors and their clients.

We are pleased to share our June ONE Idea Recap with links to the full copy of each ONE Idea from this month. AgencyONE’s ONE Ideas are designed to discuss a range of industry topics that align with current trends in Advanced Markets, Case Design, and Underwriting. We hope they bring you and your practice value and at least ONE idea!

We started the month of June with a ONE Idea titled Planning Opportunities & How Collaboration Can Increase Your Sales. This article penned by Gonzalo Garcia, CLU, focuses on the opportunities available to advisors who are alert to the Gaps in Service that exist in the minds of the customer. Gonzalo goes on to list the areas of demand in the marketplace that are NOT being fully met that offer REAL opportunities to financial advisors.

Gonzalo also discusses the importance of professional collaboration with other Centers of Influence involved in your clients’ financial, wealth, and estate planning. AgencyONE has developed a High-Performance Collaborative Teams Training (HPCT) program that has been designed to help advisors embrace the idea and the opportunity available through collaboration. The program helps develop the skills needed for successful collaboration through the use of a detailed and evolving case study. Let us know if you are interested in hosting one of your own HPCT events. Well-timed and knowledgeable collaboration will provide your clients with a more “well-rounded” financial plan and ultimately help to build your business.

Our second ONE Idea for the month of June was titled QLAC: A Strategy to Reduce Your Clients’ Taxes. This article penned by Craig Baumgartner, RICP, discusses the important benefits of Qualified Longevity Annuity Contracts (QLACs). This annuity product helps to:

• Create a lifetime income for your clients who may be afraid of outliving their money and;
• Reduce your clients’ taxes by repositioning funds from highly valued Qualified Accounts with increasing annual Required Minimum Distributions (RMDs).

This is another great planning solution for you to consider and present to your clients. Remember, annuity rates are more competitive now than they have been in a very long time!

Our most recent ONE Ideas are listed under “Updates” on our website homepage. Additionally, a full library exists on your personal Dashboard on our website under the Sales/Marketing tab (you are required to have a website login for access to the complete library). If you see something you like, we can brand it for your company and make it client-facing, if necessary. Just let us know.

AgencyONE is pleased to provide these ONE Ideas to help you and your clients gain a better understanding of the planning, product selection, design, and underwriting that goes into the purchase of life insurance (with and without linked benefits), annuities and disability insurance. We hope you find these ONE Ideas helpful when assisting your clients with their financial, wealth, business, and estate planning needs.

Please contact AgencyONE’s Marketing Department at 301.803.7500 for more information or to discuss a case!

Imagine asking your clients the following question: Sally and Jeff, are you interested in discussing a strategy to reduce your tax bill for next year? 

Everyone is interested in reducing their tax liability! What if you offered your clients a way to pay less in taxes, while also helping to insure against living too long? A Qualified Longevity Annuity Contract (QLAC) can do just that! This ONE Idea will discuss what a QLAC is, how it works and provide a case study showing how a QLAC helped the client of an AgencyONE 100 Advisor.

What is a QLAC?

A QLAC – Qualified Longevity Annuity Contract – is a special type of deferred income annuity, or deferred SPIA that is funded with qualified money. Your high-net-worth clients have likely built up a healthy portfolio of qualified retirement funds that they may never need to access. For many of your clients, these accounts represent an increasing tax liability as their Required Minimum Distributions (RMDs) rise each year as the accounts grow. 

By purchasing a QLAC, your clients are effectively reducing the amount of qualified funds that is used to calculate their RMDs. The QLAC reduces your clients’ tax liability in the near term by repositioning an asset and helps prevent them from outliving their money – “longevity insurance”.  

How Does a QLAC Work?

The client makes a single premium purchase using funds from their IRA or another qualified account. At the time of application, they select an income start date as late as age 85 to begin a guaranteed lifetime income stream. While income annuities are often thought of as inflexible, they offer several ways in which your clients can customize a policy to meet their financial needs and goals. Income annuities include the option to:

• Select a future income start date, anywhere from 13 months to 40 years in the future or up to age 85;
• Elect a single or joint life payout;
• Choose a life-only payout for the most income, or choose a period certain or cash refund payout; and
• Design a policy with a guaranteed cost of living adjustment for increasing income if your clients are worried about inflation.

How Have QLACS Changed?

When the concept was first introduced in 2014, clients could use a maximum purchase premium representing the lesser of $125,000 or 25% of qualified funds. The SECURE Act 2.0 however, comes with some favorable updates to the QLAC rules and allows clients to purchase up to $200,000, and does away with the 25% maximum. 

Case Study

Sally and her husband Jeff are both 72 years old. They have saved and invested diligently throughout their working years and have built a comfortable nest egg for retirement. The couple’s long-term non-qualified investments have performed quite well. Although Sally and Jeff each have substantial IRAs, they will likely be able to meet their lifestyle needs by drawing down non-qualified assets. Furthermore, Sally enjoys working and plans to continue her part-time consulting work for a few more years. However, they are concerned that Sally’s consulting income in addition to their full RMDs will push the couple into a higher tax bracket. Sally and Jeff both have a family history of longevity. While their retirement income needs are met under most assumptions, they are concerned about the risk of “living too long”. When Sally and Jeff’s advisor brought up the idea of repositioning some of the assets they don’t currently need and applying those assets to a possible future need, the couple was delighted by both the potential short-term and long-term benefits. By repositioning $200,000 of qualified funds, they are able to reduce their tax burden in the near term and create a joint lifetime income of $3,600 per month in the long-term starting when Sally turns 85.

• Short-Term Benefits – Sally effectively reduces the balance of her qualified accounts, and thus the amounts used to calculate RMDs. She is able to defer taking approximately $100,000 of taxable distributions over the next 10 years by purchasing a QLAC.
• Long-Term Benefits – While Sally does have to pay taxes eventually on the distributions, she will likely pay them at a lower effective tax rate after she has fully retired. Furthermore, the QLAC provides a backstop of guaranteed income which protects the couple from the risk of outliving their money – no matter what happens in the markets.

Annuity rates are more competitive than they have been in recent memory! If you aren’t talking to your clients about their annuity options, someone else is! AgencyONE can help you stay apprised of the latest market, product, and legislative developments so that you can help your clients make the best financial planning decisions for their needs.

Please contact your AgencyONE Dedicated Annuity Specialist, Craig Baumgartner, at 301.803.7532 for more information

or to discuss a case.

As an Advanced Planning and Case Design resource to many wealth management professionals, I am often asked “what’s hot in the area of products or sales ideas?” I have never said this to anyone before, but …. I LOATHE that question!

I have been doing this long enough to know that various products and design ideas have been hot over the years at various times for various reasons. A lot of these “hot” ideas and concepts are no longer around thanks to perceived abuses and action taken by Congress or the IRS. Plans that were “designed to sell life insurance” such as 419 and 412i Plans and Captive Insurance Companies were killed by the IRS. Consider, as well, the product migration that took place from decade to decade such as Whole Life (70s), Universal Life (80s), Variable Universal Life (90s), Index Universal Life (00s) …. you get the point. As I mentioned, I have been around for a while and have seen many of these products cycle in and out of favor.

Why do some advisors chase the latest product or concept? Wouldn’t it make more sense to ask the consumer/the client what they want and/or need and what is important to them? I believe that the answer is “Yes”, but statistics show that while most consumers are clear on what they think they want, when it comes to mortality, morbidity, longevity, and tax planning they:

1. Do not know how to achieve what they want;

2. Are confused and need help in gaining clarity or;

3. Are unaware of the issues and need to be educated.

While every advisor should consider what is currently available in the market, which may include “hot” or the latest products and concepts (it is the advisor’s fiduciary duty to consider everything), we should not be solely focused on the latest planning and/or design trend. As financial advisors, we need to help our clients determine what is IMPORTANT to them. To do this, we need to gain clarity by asking pertinent questions in order to make the right planning recommendations. 

One thing is very clear to me, and I have written about this before. Consumer expectations for financial services are NOT being delivered, specifically in the following areas where we are presumably experts:

1. Estate planning advice (for after your death);

2. Long-term care insurance advice;

3. Life insurance advice;

4. Business succession planning;

5. Property and casualty insurance advice; and

6. Health insurance advice.

As Advisors, we are in a unique position to provide these services but as seen in the chart below, which references a recent study conducted by the Spectrem Group, we are woefully under-accomplished. 

There are basic demographic trends that support the economic principle of supply and demand. I will not bore you with the statistics about the 10,000 Baby Boomers retiring every day and the fact that they remained the largest living adult population until 2019 – just shy of 70MM Boomers in the US according to the latest US Census Bureau count. Our aging population is also creating a MASSIVE economic shift in wealth transfer and people need financial advice and planning assistance.

Following are areas of demand in the marketplace that are not being fully met and might create opportunities for you as a financial advisor:

1. If Boomers are retiring at 10,000 per day, that is 3.65MM in a year. According to the US Bureau of Labor Statistics, in 2021 there were 330,300 financial advisors in the United States. That means that every financial advisor could get 11.05 retirees as clients each year! Supply and demand.

2. The greatest wealth transfer in the history of humanity – TRILLIONS of dollars – is happening right now. Think of the opportunities to advise clients in wealth transfer planning. Shockingly, only 22% of financial advisors deliver this service to their clients, while 93% expect it!! Supply and demand.

3. An RIA Intel article includes statistics from Boston-based Cerulli Associates and says that over “111,500 advisors will retire” over the next 10 years – a number that represents more than “one-third of the workforce and assets”. Supply and demand.

4. Elder care services are needed as the population ages. According to many studies, approximately 70% of adults aged 65 or older will require long-term care at some point. The average length of stay in long term care is 3.2 years and over 20% of residents will require care for 5 years or longer. Referring back to point number 1 above, this means that 7,000 people each day may end up in long term care! Yet only 14% of advisors provide long term care advice while 83% of consumers expect it! Supply and demand.

5. Probably my favorite. There are millions of business owners who are looking to retire or pass on their business to family members or to key executives. COVID-19 accelerated the urge to do so, however many business owners cannot afford to retire or do not know how to sell and generate enough capital to support their retirement. There are over 33MM small businesses in the United States and only 1% of advisors provide business succession planning! Do you think there is an opportunity for you? Supply and demand.

The economic headlines are full of predictions of inflation, a US national debt crisis, increasing taxes, a pending recession, environmental disasters, new emerging viruses, and potential pandemics. I could go on and on. Your retiring clients – all 70MM of them – read these headlines and worry about their golden years. This transition offers a tremendous opportunity to be of service to your clients and their families AND to potentially expand your business.

There is a HUGE demand for what you do! While many advisors are not specialists in ALL areas of planning, they know when they are out of their depth. Think of the medical industry. An oncologist and a gynecologist are very different areas of expertise, but that does not mean that a gynecologist cannot diagnose cervical cancer and consult with the oncologist for the proper course of treatment. Often times they work together collaboratively for the benefit of the patient/client. Why should financial services be any different?

In financial services, wealth management is a comprehensive term and reflecting on the Spectrem Study mentioned above, I believe that there may be a reason why only two of the areas of service listed are mostly being provided: Financial Planning and Investment Management. 

I will put forth a theory which may get me in trouble with some readers. I think that many Financial Planners and Investment Managers substantially ignore the rest of the services that clients expect them to provide, because they do not have the expertise to deliver advice confidently or choose to ignore it all together.

Collaboration is critical to holistic wealth management, just as it is in the medical field for holistic health management. The DEMAND for our services as COLLABORATIVE TEAMS of professionals exists. Changes in our industry dictate that we seek collaborative relationships in order to properly serve our clients and help our businesses flourish. Attorneys, Accountants, Investment Managers, Financial Planners and Risk Managers all have the potential to contribute to the very important journey that 70MM people are either planning for or have embarked on.

At AgencyONE, we recognize the need and embrace the opportunity for collaboration among different disciplines in the planning industry. Collaborative planning leads to a more holistic and well-rounded financial plan for all our clients. With that in mind, AgencyONE has developed a collaborative training program – High Performance Collaborative Teams Training – that combines the concepts of True Wealth Mentorship and Empowered Wealth (as presented by Ron Nakamoto to our advisors over the past few years on behalf of AgencyONE) and collaborative financial planning. We have already hosted a number of these collaborative programs and gained overwhelmingly positive reviews.

The High-Performance Collaborative Teams Training program brings together insurance advisors and their invited Centers of Influence (COI) – the “planning pod” – for a full day of high-performance collaboration.

The centerpiece of the program is an Evolving Case Study that is presented to the attendees in sections over the course of the day. Each “planning pod” discusses their client recommendations from the perspective of their planning disciplines and the changing fact patterns of the case study. The ultimate goal is to create a financial plan that considers the expertise from each of the planning specialties and is customized to the unique needs of the client.

The High-Performance Collaborative Teams Training program is designed to be duplicated anywhere in the country for our AgencyONE 100 Advisors. If you work with COIs and would like to establish a closer relationship with these advisors and generate more referrals, we hope you will consider hosting a High-Performance Collaborative Teams Training program along with AgencyONE in your hometown. We are actively working with two more of our AgencyONE 100 advisors to host a High-Performance Collaborative Teams Training program this summer in their hometowns.

We would be happy to share additional information and the roadmap we have created to host this successful program.

Please contact the AgencyONE Marketing Department at 301.803.7500 for more information or to discuss a case.