[Note: You may have to click "load images" in your email program if you don't see my pix at the right. Also, if you want to see the previous editions of this newsletter CLICK HERE. ]
Dear Everyone!
Well, true to my word... I'm baaaak! It has been a month since my last newsletter. I thought it best to let the holidays go by without another edition of this fish-wrap to darken your holiday spirit.
But now that the new year is here, I'm back to give you the "inside scoop" on what is "going down" in the hated insurance industry.
It's all about the money. (Yeah, like you didn't know that already!)
-Al
PS: Welcome to a bunch of new (and old) agents I ran into during the past couple months at parties and seminars who asked me about my newsletter. I never used to send it to agents as I didn't think they would be interested... but I find they are.
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| Life Insurance for Wealth Transfer |
As many of you know I sell annuities for Midland. This is a wonderful company that has terrific annuity products. And with interest rates low these days, a lot of folks are very 'hot' on fixed products right now. (A fixed annuity pays you a fixed rate of return like a CD and later on you can get a check each month for as long as you live (that's the short version!)
Another form of annuity is the fixed indexed annuity. This pays an interest rate according to the S&P index or some other index. There are several moving parts here and these are not for people who want total simplicity.
Annuities are great for income but a lot of "bad" agents sell them as wealth transfer vehicles. If a senior wants to leave a legacy to their children or a charity, an annuity is NOT the right choice because of taxes. While annuity funds grow tax deferred, the beneficiary who gets the windfall will pay ordinary income taxes on it.
For basic wealth transfer there is another product that I like better... it's an old-line, tried-and-true, nice and safe insurance "thing" called the SPWL.. Single Premium Whole Life policy. If you want to leave money tax-free to your heirs, this is what you want to use. Here is an example. You pop in $40,000 today into this puppy. Tomorrow... and from then on... your beneficiary will get around $70,000 when you assume room temperature... and it is TAX FREE. (Benefit depends on your age and health and amount of investment when you take out the plan.)
SPWLs have been around since the dinosaur age, but because there is some (not a lot) of health underwriting, they don't get much attention. Annuities have no underwriting so there is no chance of the agent losing a sale, thus agents "push" annuities for leaving money to others after you have no use for it.
I really like the Legacy Estate Maximizer product (click to see it). If you have cash that you want to leave to an heir, this is one (of many) insurance products you should use. Call me and I'll fill in the details. It's simple, there are hardly any moving parts... and anyone can understand how it works. Try that with your average annuity being sold today!
Annuities are great to build wealth... and liquidate it (to yourself)... but not to transfer it.
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| Aetna, Sorry I Met Ya.
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Well, I'm in trouble again with a carrier. When you are an agent who stands up for the client instead of being a "company clone" you are bound to get into hot-water with "the man."
Agents are up in arms because Aetna has decided to reduce commissions to agents who don't write more than 11 health plans a year for them.
Normally the commission on individual health insurance is 20% of the first year premium. This is fair. We agents work hard for our commissions and we get paid "as earned." When you pay your monthly premium, we get a check. We don't get a lump sum. You don't pay... we don't eat.
(Try going into this biz on 100% commission, as earned! It takes 2 years to make a living wage. How many independent agents do you know? Probably not many these days.)
Well, Aetna decided to cut the commission from 20% to 15% until we write 11 cases for them.
I'm sure you are saying "Well who cares." I understand. However if agents can't make a living in this business there won't be any agents. Do YOU want to navigate the insurance world alone? If you do, you're nuts! Agents don't cost you anything and can save you a bundle.
Anyway, I took the story to the Sacramento Business Journal (click here to see it), and I'm told it is spreading through the country via Internet news-feeds to other journalists and publications.
Bottom line, I will no longer write Aetna. It is just not economically worthwhile for me to do so. I know it sounds self-serving, and maybe it is... but I tell the truth in this missive and I feel that a company that will piss-off its agents won't think twice about doing the same to its customers.
Besides, while Aetna is a good company, they don't bring anything special to the table that the Blues and Kaiser don't have. Early last year their underwriting was 'more liberal' and their rates were better, but that's no longer the case today for most of the plans that I like to write (HSA compatible.)
History is on my side. Carriers are ALWAYS looking for ways to cut out agents. Why? Simple. We know the system and we keep people from buying plans that will waste their money.... but make fortunes for the carriers. And they know this. It's no big secret in the industry.
The dream of every carrier is for you and your dog to buy insurance direct from them via the web or their in-house staff. Why? Because they KNOW that you will buy a plan that is way over-priced, that has bad value, and which will net them a huge profit. You will buy a plan that I would NEVER let you buy. The carriers would go through root-canal to get rid of all the guys like me out there.
And they have tried. And what happens? Yeah they sell a lot more plans that are high margin... but the fraud rate goes through the roof. Agents are very good at obtaining accurate application information... because our license is on the line if we try to collude with the client to scam the carrier.
But take out the agents and people will lie through their teeth when they apply online. Can the carriers catch all the fraud? No way. Insurance is still a personal sale, not unlike having your hair done or a pedicure.
Is Aetna mad at me? I doubt it. I doubt they even care right now... but they might if enough agents follow my lead.
One of two things will happen. Either Aetna will be successful and other carriers will do the same thing (Follow the money!) Or... no one on the planet is going to write Aetna products and the carrier will abandon what is a really stupid compensation policy.
Obviously, I'm betting on the second outcome. But if the first becomes the norm, agents will leave the sector to sell life, disability, voluntary (like Colonial or Aflac), annuities, or "senior" products (Medicare Advantage, supplements, etc.) The clients will lose as much as the agents will.
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| You Can Bank On It |
Do you have "non-local" money out there... say at E-Trade Bank or GMAC? You might want to think about bringing some of it back to local banks. Why? Mainly because many of the smaller community banks will give you a better interest rate AND if things go bust you can line up to get your cash.
Last week I moved a CD from GMAC Bank to the new Commerce Bank of Folsom. Why? Because they are a one-branch locally owned bank, they are conservative (they have to be) and they want (and need) the business.
Banking at a small community bank is like walking into Cheers. Everyone knows your name!
Recently, the president of American River Bank left there and went to Commerce Bank. Greg Patton is a good guy, he knows banking, and I feel an extra degree of safety when I personally know the people who are running the show.
I don't think this is the time to have funds in the large institutions as they all have a large portfolio of non-performing loans which I think will eventually cause a few of them to go paws-up.
Of course, if you stay under the $100K FDIC limit you will be OK, but do you really want the hassle if the FDIC comes in and takes over? Good luck dealing with the bureaucrats in getting your money back. (Yeah, you will get it, but probably not too quickly!)
This is the time for safe-money products... whole-life or guaranteed universal-life plans, local banks, and simple, fixed annuities. Try to remember the motto I live by and which I try to teach all my clients. "At the end of the day, it's not how much you make that determines your net worth, it's how much you don't lose."
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, work-supplements, medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've been here 25 years and I've built my business reputation on integrity and honor.
It's that simple.
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