Thursday, July 21, 2016

"Experts" Hate Annuities - Clients Disagree

I was most of the way through my fourth seminar of the week, just wrapping up with a discussion on “sequence of returns risk” as one of the five retirement risks and I was about to enter the last part of the seminar where I propose potential solutions to this risk.  I went on to discuss that the conventional “rule” for withdrawing money from a securities portfolio is 4% adjusted for inflation (i.e. if you have $1 million at retirement then the first year of retirement you can withdraw $40,000 per year). I then went on to explain an alternative solution which can often times allow one retiring at 65 to withdraw maybe 5% of their “income value” guaranteed* for the life of the client. 

At this point I had to introduce the audience to the harsh reality that this potential solution is (hold your breath!), an annuity.  I told the audience what I just explained was a Fixed Indexed Annuity (FIA) with a Guaranteed Lifetime Withdrawal Benefit (GLWB).  After doing this, you would never guess what the reaction was from the audience, again, for the fourth time that week.  Here is what they did; they nodded their heads in agreement and wrote down on their notepads the words, Fixed Indexed Annuity!

Not dramatic, but the point is that consumers’ disgust toward low annuity rates and annuities in general was more in my head than any of the clients’ heads.  That is because over the last 16 years the stock market has been chopped in half twice!  The consumers in the room know that all too well and they are also familiar with the historically low rates on bank savings products. I believe that while discussing annuities with clients you should have a conversation about the relativity of annuities to what the clients do know (market, bank-type products, etc.).  And we should be confident in discussing this “relativity” because when the market was being chopped in half, clients with retirement dollars in an FIA would not have lost any of their premium or interest.** 

Consumers also appear to disagree with what the financial “experts” like Suze Orman and Ken Fisher say about annuities.  In fact, 78% of people who own annuities are satisfied with their access to their money.1 More than 80% of fixed annuity buyers are happy with their purchase2, which is a very high happiness factor among financial products.

Even in light of the challenges we face with the Department of Labor’s Fiduciary Rule, I am confident we will adjust and FIAs will continue to be a mainstay of our industry.  However, in the short run we will likely experience some changes with the FIA product line. For financial professionals that may have their businesses highly concentrated on FIAs, I would propose a way to “smooth out” the volatility in your practice. I propose Life Insurance!  If you don’t like underwriting, there are attractive Simplified Issue Life Insurance products.  There are also Single Premium Whole Life products and Single Premium Indexed Universal Life products, which offer an attractive alternative to FIAs, when the client doesn't need the money during their lifetime. 

I can comfortably assure you that if you know FIAs, it's not a very far leap to also learn and write IUL.  I have taken this leap myself and at the time I had less educational resources and support than what you have when you partner with a marketing organization with a strong training platform. This is what we at Partners Advantage specializes in -  Education that Causes Sales. I encourage you to prepare for the future of our industry and continue to broaden your knowledge to truly serve your clients needs. 

For financial professional use only.  Not for use with the public.

* Guarantees are backed by the Financial Strength and claims-paying ability of issuing company.
**Insurance and annuity products: Are not deposits. Are not guaranteed by a bank or its affiliates.  May decrease in value. Are not insured by the FDIC or any other federal government agency.

1 Genworth The Future of Retirement Income Study 2014
2 LIMRA Study – August 2012

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of premium and credited interest, and the reassurance of a death benefit for beneficiaries.
An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal benefits, or GLWB) is an additional feature available with some annuities and generally optional and come with additional costs. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities.

Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney.

The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances. 


Thursday, July 14, 2016

Succession Options for the One Business Owner

By: Bill Jackson, J.D., CLU, Sr. Advanced Markets Consultant
Partners Advantage Insurance Services, LLC

One of the most difficult scenarios in business planning is the solely owned business. Without another major owner to participate in a traditional buy out, many businesses end up being liquidated at little value with a negative impact on the employees. Assuming the business has some capable key employees or can attract them, all is not lost. The following are some of the possible options.

A long-term installment sale was a traditional approach to employees buying a business. After agreeing on a value the employee or employees agree to buy the business over a period of seven to ten years. The former owner holds a promissory note with installment payments over a seven to ten year period with a reasonable interest rate, signed by the buyers. The note is secured by the assets and stock of the business and the personal guarantee and collateral (usually residences) of the buyers. This is the least secure option.

This transaction structure draws upon the company’s management resources, outside equity or seller equity, and significant debt financing. This structure can be an ideal way to reward your key employees, position the company for growth, and minimize or eliminate ongoing financial risk. To effectively execute a leveraged management buyout, the business should possess the following characteristics.
  •  A management team that is capable of operating and growing the business without your involvement
  • Stable and predictable cash flow.
  • Good prospects for future prosperity and growth. The growth of the company should be described in detail in a management prepared business plan.
  • A solid tangible asset base, such as accounts receivable, inventory, machinery and equipment. Hard assets make it easier to finance the acquisition through the use of debt, but service companies without significant tangible assets can obtain debt financing, albeit at higher cost.
  • Have a fair market value of at least $5 million (probably $10 million in order to attract the interest of private capital 

An ESOP is a tax-qualified retirement plan that must invest primarily in the stock of the company. In operation, it works just like a profit sharing plan: the company’s contributions to the ESOP are tax-deductible to the company and tax-free to the ESOP and its participants essentially all of the company’s employees. In the context of selling at least part of the business to the key employees, the ESOP is used to accumulate cash as well as to borrow money from a financial institution. It uses this money to buy the business owner’s stock. Key employees will likely own a significant part of that stock because ESOP allocations to participants are based on compensation. Typically, however, key employees will want more than indirect ownership. They will want to control the company and purchase a controlling minority interest in the company. There can be significant tax advantages with this approach. It works best with stable long term employee groups.
This plan works best for most owners who want to:
  • Transfer their businesses to key employees.
  • Motivate and retain key employees; and
  • Receive full value for their businesses and tie key employees to the company. This is done  by making it economically rewarding for key employees  to stay with the company.
  • The following is an example of this type of plan.
  • Establish a plan in writing  for the eventual buyout of all ownership in the company;
  • Begin the buyout of a portion of the owners interest in the company by selling to two existing key employees 10% of the stock which has been converted to non-voting shares. The initial purchase price will be paid in cash. If either key employee needs to borrow funds to secure the necessary cash, the owner will be willing to guarantee the key employee’s promissory note to a bank.
  • The plan also includes a two-phase sale of the business. First will be the sale of an initial minority interest from a pool of 40 percent of the company’s total outstanding stock, which has been converted to non-voting shares, for current and future purchases by key employees. Initially, five percent will be owned by each buyer. For purposes of the initial buy-in and any future repurchases of that stock, the value of the stock is based on a valuation (with minority and other discounts) provided by a formal valuation. In many cases this discounted value could be as low as 50% of the true value of the shares. A lower initial value is necessary in order to make the purchase affordable to the employees as well as to provide them an incentive to remain with the company.
  • Even though the key employees will not receive voting stock, there will be significant benefits to them in purchasing non-voting stock.
  • Enjoy actual stock ownership in the company, and receive any appreciation in the stock.
  • Participate based on their stock ownership in any distributions made by the company.
  • Receive fair market value paid by a third party for their percentage of stock if the company were to be sold to a third party
  • Participate more directly in day-to-day operating decisions
  • Initially be appointed as directors to serve under the terms of the bylaws on a guaranteed basis
  • Participate in determining which if any additional key employees will be offered stock out of the 40 percent pool.
  • Ongoing purchase payments can be made by the key employees using bonuses and earnings from the company. Once they have acquired a significant minority interest. Loans may be available through private or banking sources to continue the buyout.  

Each key employee purchasing stock will enter into a stock purchase agreement. Of course the agreement with the company would provide for the repurchase of stock in the event of death, long-term disability, or termination of employment of each party to the agreement. An entity type of agreement is most suitable for this strategy. This plan needs a backstop and a way for the key employees to make the final completing purchase payments. The backstop could be provided by permanent life insurance on each party to the agreement, which would complete the sale if a party to the agreement dies prematurely. If the policies are permanent and smartly funded, tax free cash value via policy loans could be used to complete the sale at the end of the instalment period. The entity style of buy sell agreement provides an additional element of security to the original business owner, because the business owns the policies that are being used to fund the agreement  completing stock redemption.

How it works for a $2,000,000 business with two key person purchasers 

Source of Funds
Key Person A
Key Person B
Initial buy in purchasers own money
$84783  50% Minority Discount
$84783 50% Minority Discount
Buy in using distributions or bonuses
$84783 Discount Possible
$84783  Discount Possible
Distributions or Bonuses
$84783 Discount Possible
$84783 Discount Possible
Distributions or Bonuses
$84783 Discount Possible
$84783 Discount Possible
Loans Distributions or bonuses
Loans Distributions or Bonuses
Loans Distributions or Bonuses
Loans Distributions or Bonuses
Loans Distributions or Bonuses
Loans Distributions or Bonuses
Tax free loans from life insurance

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Partners Advantage LLC does not provide legal or tax advice you are urged to seek advice from your personal legal or tax advisors.

For financial professional use only.  Not for use with consumers.


Thursday, July 7, 2016

How Asset-Care® IV helps you give clients what they want

Asset-Care IV can help clients protect their retirement from the financial risks of a long-term care (LTC) event while providing the guarantees of whole life insurance. Asset-Care IV allows for continuous-pay options similar to traditional LTC insurance, which is perfect for clients who do not have or are unwilling to pay a large lump sum for LTC protection.
Unlike traditional LTC insurance, with Asset-Care IV: 
  • Premiums are guaranteed to never increase
  • Clients can pass a death benefit to their loved ones if LTC is never needed 
  • If clients change their mind, they can get back their policy cash value after the first year
Do you have potential clients who are looking to protect their retirement from LTC risks with a continuous-pay option that provides valuable guarantees? Show them Asset-Care today, with valuable LTC protection and guarantees.

Asset-Care IV campaign flyer »
How asset-based LTC works flyer »
Two simple questions to ask flyer »

Contact Partners Advantage for more information on OneAmerica:
888-251-5525, Ext. 700

For use with financial professionals only. Not for public distribution. 

Notes Products are issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Asset-Care form number series: L301 and R501 may not be available in all states and may vary by state. All guarantees are subject to the claims-paying ability of State Life. Asset-Care® is whole life insurance (in MD and PA, universal life) that allows access to 100 percent of the life policy death benefit for qualifying LTC expenses (paid monthly).
Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May go down in value • 


© 2016 OneAmerica Financial Partners, Inc. All rights reserved. OneAmerica® and the OneAmerica banner are all registered trademarks of OneAmerica Financial Partners, Inc.

Thursday, June 30, 2016

Generating inflation-adjusted retirement income using the least amount of the portfolio

Beyond using annuities and life insurance for retirement income or death benefits, do you know how to generate inflation-adjusted income for clients using the least amount of the portfolio?

Partners Advantage is hosting a special two-day intensive workshop that provides financial professionals with some of today’s most powerful retirement income strategies. This is especially focused on providing advanced strategies for dual licensed - securities and insurance licensed professionals! It’s an incredible opportunity to help take your knowledge base and skills to the next level! 

These are advanced concepts to help address clients’ income and tax challenges in retirement. Partners Advantage is sponsoring ThriveU Workshops with Curtis Cloke. Workshop to be hosted in Irvine, CA on August 11-12

Contact the Partners Advantage Brokerage Team for more information: 
888-251-5525, Ext. 700.

Only a limited number of seats are available. Request information here.
Fill out my online form.

These events will feature:
Curtis Cloke, CLTC, LUTCF, RICP® and Adjunct Instructor at The American College is an award-winning financial professional, keynote speaker and author. He is an early pioneer and advocate for deferred income annuities (DIAs). His contribution toward the discovery, development and delivery of the power of the DIA in retirement plans has been widely acknowledged and embraced as part of the retirement income puzzle by the financial industry. Curtis is the founder and CEO of Thrive Income Distribution
System, LLC, launched in 2009, which helps advisors and clients create more income utilizing less of the client’s portfolio.

Charlie Gipple, CLU,® ChFC® is the Senior VP of Sales & Marketing at Partners Advantage. He has a track record of helping agencies and financial professionals bring about “Causation of Sales.” Prior to joining Partners Advantage, he served as the national director of index products at Genworth and also spent 11 years at ING leading a number of diverse product lines and distribution channels. He is well recognized in the annuity and life insurance industry as a speaker and has extensive experience with index products, financial markets, financial legislation, behavioral finance and the positioning of insurance products.

Oscar Toledo is the Manager of the Platinum Service Team at Partners Advantage. He has spent 17 years in the insurance industry as a business consultant and in personal production. He has helped many agencies grow their life, annuity and linked benefits business by providing innovative sales concepts, extensive product knowledge and superior support.

For Financial Professional Use Only. Not for use in solicitation or advertising to the public.

Securities registration may be required for some strategies. Partners Advantage and its representatives do not provide legal or tax advice. Please encourage your clients to see advice from their tax advisor or attorney for their individual financial situation.

The third party information and opinions included in this training have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by

Partners Advantage. The material is being provided for information purposes only and is not a solicitation for the purchase of any product, nor should it be construed as advice designed to meet the particular needs of clients. Financial Professionals should ensure they continue to follow the current policies on the use of any advertising, third-party materials and/or social media as required by their broker/dealer and registered investment advisor, if applicable, and the insurance carriers they represent.


Thursday, June 23, 2016

Providing More Retirement Income Options for Your Clients

As more companies do away with defined benefit pension plans, it is left as the responsibility of individuals to ensure that they have enough income for retirement. While many people may fear outliving their savings, other threats to both long- and short-term retirement incomes can include: 

  • Inflation
  • Market uncertainty
  • Medical expenses
Longevity only magnifies these risks, as living to an older age means that these risks must be managed for a longer period of time. Because of this, many consumers over the past few years have been turning to income producing products, as these insurance vehicles can allow them a guaranteed* incoming cash flow, oftentimes without regard to market performance, or even surrounding economic issues. This has recently led to strong sales of fixed indexed annuities (FIAs), deferred income annuities (DIAs), and single premium immediate annuities (SPIAs).
Some of the clients that these products may be well suited for can include those who: 
  • Are seeking to compliment other income sources such as Social Security
  • Do not have any type of guaranteed* income or defined benefit pension plan in place
  • Are risk-averse and are seeking to protect the premium, while at the same time seeking market indexed growth
  • Are looking for a way to convert large sums of cash from retirement plans into immediate income
Although all clients’ situations are unique, the benefits that are offered through these products can cover a variety of different needs. By not having these vehicles available, it is possible that you might be leaving the door open for clients to go elsewhere to take care of their retirement income needs – possibly taking other business with them in the process. But, by becoming familiar with how FIAs, DIAs and SPIAs can provide growth, and protection of premium, client portfolios and long-term client relationships can be strengthened.

Contact Partners Advantage Annuity Brokerage Team
for More Information and Complete Product Assistance:
888-251-5525, Ext. 709

* Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of premium and credited interest, and the reassurance of a death benefit for beneficiaries. Any distributions may be subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax. Early withdrawals may result in loss of principal and credited interest due to surrender charges.

Partners Advantage Insurance Services and its representatives do not give legal or tax advice. Consult your tax advisor or attorney for legal or tax advice.

A fixed indexed annuity can provide annuitization as a means to provide retirement income payments. An alternative option to annuitization could be the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.

Please note that in order to provide a recommendation to a client about the liquidation of a securities product, including those within an IRA, 401(k) or other retirement plan, to purchase a fixed or variable annuity or for other similar purposes, you must hold the proper securities registration and be currently affiliated with a broker/dealer or registered investment adviser. If you are unsure whether or not the information you are providing to a client represents general guidance or a specific recommendation to liquidate a security, please contact the individual state securities department in the states in which you conduct business.



Thursday, June 16, 2016

Great 8 Road Show comes to Irvine, CA on July 12! Register Today!

Education to Fuel
Your Sales Success!
Be Inspired. Expand Your Knowledge.

-Hilton Irvine/Orange County Airport

Attendees will receive a WebCE Voucher good for one  complimentary CE Course!*  (worth up to 15 hrs!)

The "Great 8 Boot Camp" is led by nationally recognized indexed product educators Charlie Gipple CLU®, ChFC® and Oscar Toledo from Partners Advantage Insurance Services. When you attend the Great 8 Indexed Boot Camp you will walk away knowing more about Life Insurance, Annuity and Linked Benefit products.

Our Carrier Sponsors include:
Allianz Life Insurance Company 
of North America

Reviews from Financial Professionals Attending Previous Workshops >> HERE

The event is open to licensed financial professionals and hosted by Partners Advantage. For a limited time only use promo code JULY100OFF  to register for July boot camp
to receive $100 off the tuition fee! 

Not located in Southern California? View other cities and dates below:
August 23 – Omaha, NE
Embassy Suites by Hilton Omaha Downtown Old Market 555 S. 10th Street, Omaha, NE 68102
August 25 – Chicago, IL
Hotel TBD in Rosemont Area
August 24 – Des Moines, IA
Holiday Inn Hotel & Suites West Des Moines-Jordan Creek 6075 Mills Civic Parkway, West Des Moines, IA 50266
August 26 – Minneapolis, MN
The Westin Edina Galleria 3201 Galleria, Edina, MN 55435
Please contact the Partners Advantage Brokerage Team at 
888-251-5525, Ext. 700 

For financial professional use only. Not for use with consumers.

*This voucher is good for one (1) complimentary CE course. Not available for some specialty courses or packages. This voucher includes the course material, exam, grading the exam, certificate of completion and state reporting, where required. Additional charges for paper materials, shipping, and state filing fees may apply. The course and exam must be completed within 12 months of course selection. Some states limit the number of CE hours that may be taken through self-study or correspondence. Be sure to check your state requirements before ordering.
The testimonials may not be representative of the experience of other financial professionals and are not a guarantee of future success. The financial professionals who provided these testimonials did not receive any compensation for providing these comments.
The third party information and opinions included in these presentations have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Partners Advantage. Although we may promote and/or recommend the services offered by these companies, financial professionals are ultimately responsible for the use of any materials or services and agree to comply with the compliance requirements of their broker/dealer and registered investment advisor, if applicable, and the insurance carriers they represent.
Tuition fee for each Great 8 Boot Camp attendee is $100. The fee, payable in U.S. dollars, reserves your seat. A USD $100 advance deposit per participant is fully refunded to attendees who are present for the entirety of the meeting. The tuition is payable to Partners Advantage upon registration for the Great 8 Boot Camp and can be made via acceptable credit cards for tuition payments (VISA, MasterCard, American Express, Discover). 24-hour notice must be given prior to event for full refund. The manner of reimbursement will generally coincide with the manner in which the tuition was paid within a reasonable amount of time following the event when attendance can be validated.
Astro #45294


Thursday, June 9, 2016

It's Time to Dare to Compare Income Withdrawal Riders on Fixed Index Annuities

It's no surprise that fixed index annuities (FIAs) with income withdrawal benefits (either built-in or as optional riders for an additional cost) have become a popular solution for clients seeking guaranteed income in retirement. What may surprise you is that the total value your client could actually receive from these withdrawals can vary substantially.

Income withdrawal riders on fixed index annuities can vary significantly when it comes to providing total income payments over your clients' life expectancy.

Have you seen the Dare to CompareSM online calculator from Allianz Life Insurance of North America? 

We have been pleasantly surprised and impressed!
This new income calculator can estimate your clients' lifetime income withdrawal payments over their life expectancy, comparing the opportunity for increasing income that many Allianz annuities offer to a level payout (using a hypothetical FIA with an income rider) over the same time period.1
The calculator can help provide you with:
  • Simplicity - easy-to-use calculator allows for quick results
  • Comparisons - estimate the total value of income withdrawal payments over life expectancy
  • Product recommendations - use the information to help make the appropriate product recommendation for your client
The calculator is designed to highlight the income feature only. Keep in mind that FIAs are designed to meet your clients' long-term needs for retirement income. They provide many benefits for your clients, including principal protection, the potential for tax-deferred growth, and a death benefit for beneficiaries. Always consider each of the features available and how they work when considering if a product is appropriate for your client's needs.

Sign-up here for a Dare to Compare online calculator overview.

Contact the Annuity Brokerage Team at Partners Advantage
to see how it works!
888-251-5525, Ext. 709

For financial professional use only - not for use with the public.

1The calculator estimates using hypothetical values as well as minimum values at 0% for the client's life expectancy only. Hypothetical values are not guaranteed. Actual client results will vary by product selected, number of years they live to take income, and the actual performance of the product selected.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.
Products are issued by:
Allianz Life Insurance Company of North America
5701 Golden Hills Drive, Minneapolis, MN 55416-1297
CONFIDENTIALITY NOTICE: The information in this email may be confidential and may be legally privileged. It is intended only for the use of the individual(s) named above. If you are the intended recipient, be aware that your use of any confidential or personal information may be restricted by state and federal privacy laws. If you, the reader of this message, are not the intended recipient, you are hereby notified that you should not further disseminate, distribute, or forward this email. If you have received this email in error, please notify the sender and delete the message. Thank you.
Product and feature availability may vary by state and broker/dealer. 

Astro #45114