Transcript LINKED BENEFITS - Zenith Marketing Group

Solutions That Leave an Impression
In the Wholesale Brokerage World
A Two Word Strategy for Securing
Your Clients’ Financial Future
LINKED BENEFITS
Opening Thoughts
A new, better way to address a serious problem
Putting your clients in the best possible position
for retirement
You Can Do This! –It’s not complicated!
Strengthen Client Relationships
A New revenue center for 2011
Zenith Marketing Group has unique resources
to help you get started – Today!
Eight Words or Less
“If you can’t state your position
In eight words or less,
you don’t have a position.”
– Seth Godin
The Question Is…
“Are you willing to speak to
your clients about something
unfamiliar to you and them,
in order to do what’s best
for them?”
Perfect Timing
What do clients want?
– 100% liquidity
– Tax-advantaged benefits
– Guarantees
– Upgrade performance of “Safe Money”
without investment risk
Linked Benefit products address these
client concerns.
Why Now?
Environmental factors
– Low rates
– Lower risk tolerance among clients
– More money “sitting on the sidelines” than ever before
2010 marks the dawn of a “new era” in retirement protection planning
– Pension Protection Act of 2006: New tax advantages
– New products
New products address major concerns clients have
– Extended care protection with no on-going out-of-pocket costs
– Control of assets; 100% of money back if things change
– If an extended care need does not occur, beneficiary receives a
tax-free Death Benefit
– Streamlined underwriting makes selling to insurable clients easy
What Do I Have To Do?
Start a new conversation with clients who have assets and
do not have a solid plan for their long term care needs.
How Do I get Started?
It’s Simple…Just ask these questions:
– What is your plan should you have an extended care
need?
– If you needed extended care today, which assets
would you liquidate first?
– If something happened to you today…what would you
do?
Fiduciary Responsibility
Doing What’s Best For Your Clients
If your clients have assets and have no plan in place –
who is to blame?
– Will their heirs seek to blame advisors who did not
recommend a plan of action?
– Have your clients signed a letter indicating that
they’ve declined asset protection?
– Can you build a sound financial strategy without a
plan for LTC costs?
The Facts About
Extended Care
70% age 65 or older will need it temporarily or permanently
100
90
80
70
60
50
40
30
20
10
70%
Nursing home*
$80,000/year private
$73,000/year semiprivate
Assisted living unit*
$3,100/month
Home care aide*
$25/hour
Adult daycare*
$60/day
0
Less than 10% of available buyers have purchased coverage
*National Averages. Actual costs vary by state.
Who Needs It & How Much?
In 2008, 9 million Americans required
Long-Term Care Services
By 2020, that number will be 12 million
20% of clients will need care for more than 5 years
40% will require care in a nursing home for
some time
Median-Annual Care Costs:
2010
Assisted Living Facility Monthly Rates (One Bedroom/Single Occupancy)
Region
USA
New Jersey
North Carolina
Pennsylvania
Maryland
New York
Median Annual Rate
$38,220
$57,300
$31,950
$34,920
$38,100
$39,060
Five Year Annual Growth
7%
5%
1%
8%
7%
6%
Nursing Home Daily Rates (Semi-Private Room)
Region
Median Annual Rate
USA
$100,923
New Jersey
$65,700
North Carolina
$85,593
Pennsylvania
$80,300
Maryland
$110,960
New York
$39,060
Five Year Annual Growth
5%
5%
4%
5%
5%
4%
Nursing Home Daily Rates (Private Room)
Region
Median Annual Rate
USA
$75,190
New Jersey
$109,865
North Carolina
$71,175
Pennsylvania
$90,338
Maryland
$83,585
New York
$116,800
Five Year Annual Growth
5%
4%
5%
5%
3%
3%
Claims Are Lasting Longer
Average duration of claim; 3.8 years
– 73% of Claims Start at home
Carriers are seeing significant percentages of cognitive claims
(nearly 50% of all claims)
– These claims produce longer stays
– Alzheimer’s / Dementia
– Stroke / TIA
Impact on Caregivers, Family, and Friends
– Emotional
– Financial
– Logistics
– Family Dynamics
– Everyday Life
Activities of Daily Living
To better understand “extended” care, think of the
activities that you performed when you woke up
this morning.
You probably:
– Climbed out of bed (Transferring)
– Used the bath or shower (Bathing)
– Walked to the bathroom (Continence)
– Got dressed (Dressing)
– Used the toilet (Toileting)
– Ate breakfast (Eating)
Activities of Daily Living
While we are healthy it is easy for us to take for
granted the above Activities of Daily Living (ADL's).
However, when you or a loved one is stricken with a
degenerative condition such as a stroke, performing
these ADL's becomes impossible without the
assistance of another person. This type of care is
chronic (full-time) and thus becomes very expensive.
Cognitive Impairment, example Alzheimer’s, is a
stand-alone trigger of benefits
Are You Prepared
To spend down your retirement savings?
– $80,000 X 4 years = $320,000
– $320,000 X 2 (includes spouse) = $640,000
To Spend $640,000?
If you had $1.00…
How would you choose to spend it?
You could set it aside in a safe place, knowing that it will always be
there when you need it.
– At 4% interest, money doubles after 18 years
– At 5% interest, money doubles after 14.4 years
OR
Deposit only 20 cents into a product that provides tax-free leverage…
freeing up 80 cents to use as you like
– Transform your 20 cents into One Full Dollar of LTC Benefits…
– Set aside the Whole $1 and obtain $5.00 worth of protection
What would you do?
Ask Clients About
Their Plan!
What is your plan should you have an extended
care need?
Which assets would you use first to pay for an extended care need?
Traditional LTC Insurance
Why Do Clients say No?
– Too Expensive
– Premiums Can Go Up!
– What if I don’t use it? Do I get my Money Back?
– It’s too complicated
– I don’t need it - I have plenty of money set aside
Which Plan Makes
More Sense?
Government programs
– Medicaid
– Medicare
– CLASS provisions
Self-insuring
Traditional long-term care insurance
Linked Benefit Products
How To Begin Client
Discussions
Important Questions to Ask:
Do you have an extended care plan?
How will you fund your extended care plan?
Do you have assets readily available?
– Note: If the client does NOT have assets readily or is just beginning to save
on their own, possible Linked Benefit ongoing premium sale.
How would you feel about a more efficient way to
self-insure?
How do you feel about overpaying for your care?
A Linked Benefit Product…
What Is It?
Linked benefit product: a base product such as life insurance
or an annuity with a "rider" that provides long term care benefits
if needed.
Provide Multiple Benefits, paying out the first benefit,
as needed.
Single Premium Products
– Life insurance policy (Death Benefit) and LTC benefits
– Fixed annuity (Cash value while alive) and LTC benefits
On-going Premium Products
– Life insurance policy and LTC benefits
– Fixed annuity and LTC benefits
Linked Benefit Products
An “asset repositioning” story, moving your client’s
money “from the left hand to the right hand” – they
still control it.
Get client assets off of the “Sidelines”
– Fixed alternatives are offering very low rates
– Client risk tolerance is down – clients seeking
safety and control (liquidity).
– Huge population of retirees
Linked Benefits = Leverage
Obtain More Coverage At Less Cost
Extended Care
Reimbursement
Death Benefit
Return of
Premium
If you need
extended care
If you never need
extended care
If you change
your mind
Up to 5 times premium dollars
Income tax-free death benefit
Reimbursements for qualified long-term
care costs intended
to be income tax-free
Any portion of guaranteed death
benefit not used for long-term care
benefits will pass to beneficiaries
income tax-free
Provides a money back guarantee
through the Return of Premium Rider on
single premium and certain flexible
premium universal
life policies
Benefits paid up to the maximum monthly
amount specified in your policy
Any money borrowed or withdrawn
from the policy
Specified amount of death
will reduce the death benefit
benefit used to reimburse
long-term care costs
Optional rider can provide coverage for
specified number
of years after death benefit is depleted
Cost of riders deducted from policy’s
account value
Your premium payment can be returned
to you, minus any loans, withdrawals, or
benefits paid, and is subject to the terms
of the Return of Premium Rider
5 Benefits of
Linked Products
Tax-Free Long Term Care Benefits
– A more efficient way to self-insure
– Asset protection
– Protecting income sources from depletion
Return Of Premium
– Client controls what they invest
Death Benefit
– Life Products - Tax Free
– Annuity Products – Tax LIFO on Gains above basis
Guaranteed Benefits
– All contract features are guaranteed
Streamlined Underwriting > 6-8 days!
Sample Client Details
65 female, non-smoker
$100,000 set aside for LTC needs
Opted not to purchase LTC insurance
Has chosen to self insure
Normal health
Wants to retain control of her money
Benefit 1:
Tax-Free LTC Benefit
$100,000 becomes $500,000
$83,170
Year 6
$100,000
$332,680
$166,339
Income Tax-free
Long-term Care
Benefit
Max LTC
$6,931/month
$83,170
Year 2
$83,170
Year 5
$499,017
Extended Long-term
Care Benefits
$83,170
Year 4
$83,170
Year 1
$83,170
Year 3
Total Income
Tax-free
Long-term Care Benefits
Benefit 2:
Tax-free Death Benefit
$100,000 Becomes $166,339
Death Benefit = 2 years of LTC Benefits
$83,170
Year 2
$100,000
Deposit
$166,339
tax-free
Death Benefit
$83,170
Year 1
10% Residual Death Benefit of $16,633
$83,170
Year 6
$83,170
Year 5
$83,170
Year 4
$83,170
Year 3
Benefit 3:
Return Of Premium
If the client ever changes his/her mind, provides a
100% lifetime money-back guarantee.
$83,170
Year 6
$83,170
Year 5
Return of Premium
Guarantee
$83,170
Year 2
$83,170
Year 4
$83,170
Year 1
$83,170
Year 3
$100,000
Benefit 4:
Guaranteed Benefits
All benefits are guaranteed
Carrier cannot:
– Raise costs
– Ask for more premium
– Decrease benefits
Benefit 5:
Streamlined Underwriting
No Exams, Labs, or Doctor’s Statements
Pre-screening Questions
45 Minute Phone Interview
75% of Client who pass the pre-screen questions
are approved
Total Process takes 6-8 Days
The Process:
Simple & Efficient
Client Approach – Have they properly positioned their assets for
the risks they face in retirement?
Data Gathering
– Determine client needs and potential sources of funds
Case Design
– Run Quotes, review options with your Sales Rep
– Meet with client and obtain client commitment
Pre-Screening Questions
Submit Application to Zenith Marketing Group
Phone Interview Scheduled by Carrier within 2-3 of receiving app
Underwriting decision 2-3 days later
Data Gathering
…What You Need to Know
Which assets are not being used for producing
income for fixed living expenses?
Existing Annuities and Life policy cash values
Existing LTCi protection
Clients assets
Qualified and non-Qualified
Sources of Funds
Non Qualified Money only
CD’s
Money Markets
Investment Accounts
Existing Life Insurance Cash Value
Existing Deferred Annuity
Key questions to determine if an asset is viable for
use in a linked benefit product
The Pension Protection Act
of 2006
LTC rider benefits will be income tax free because the rider will be
treated as a “qualified” LTC contract after 12/31/2009
PPA of 2006 defines certain tax issues for LTC contracts and for
life insurance and annuity contracts with LTC riders (“Combo” or
“Linked Benefit” products)
– Section 1035 tax free exchange of life insurance for LTC
• A life insurance contract with LTC rider is defined as life
insurance for exchange purposes
– Section 1035 tax free exchange of annuity for LTC
• An annuity contract with LTC rider is defined as an annuity
for exchange purposes
The use of existing Non-Qualified Annuity and Life Insurance
cash values to fund Linked Benefit products via tax free Section
1035 exchanges.
The PPA of 2006
1035 Exchange Options:
Life

Life
Annuity 
Annuity
Life
Annuity

NEW TAX ADVANTAGED OPPORTUNITIES
NEW
Tax Free 1035 Options:
Life Life / LTC “LB” Product
Annuity Annuity / LTC “LB” Product
Tax Free 1035 Options:
Annuity  LTCI
Life
 LTCI
QLTCI
 LTCI
ALSO
ACCEPTED
What Does The Ideal
Client Look Like?
…Focusing on the Single Premium Sale
Assets available to self insure that are not needed for
retirement income
Must be insurable, products available for ages 40-80
Has decided to self insure for LTC needs
Wants control of asset should needs change
– Wants access to assets
– Liquidity
May Have said “No” to Traditional LTC Insurance
– Wants more than just LTC benefits
– Asks “What if I don’t need the LTC?”
The High Net Worth Clients
Client Profile
Husband, John age 72 & Wife, Mary age 70
Both in Good Health
Net Worth of $5,000,000
Situation
They have a Survivorship Life Insurance policy in an ILIT
with a DB of $3 Million to leverage assets to the
next generation.
They feel they are well positioned to self-insure for a
possible long term care need.
– Multiple residences
– Investment accounts (stocks, mutual funds,
retirement plans….)
– $350,000 in low-yielding money funds for liquidity
The High Net Worth Clients
Strategy
Maximize efficiency in their portfolio.
Reposition a portion of the low-yielding assets into a Linked Benefit policy
($100,000 each)
$134,079 Tax-Free Death Benefit
$402,237 Tax-Free LTC Benefits
$102,426 Tax-Free Death Benefit
$307,278 Tax-Free LTC Benefits
Result
Leverage
$236,505 of Tax-Free Death Benefit
$709,515 of Total Tax-Free LTC Benefits
…Plus $150,000 that was not used =
$859,515
NQ Annuities To Fund
Linked Benefits
Client Profile
Jane, Female, age 71; General Good Health;
Recently Widowed, No Children
Situation
Jane’s husband recently passed away.
Among her husband’s assets, 4 NQ Annuities with gain and
no CDSC totaling $176,000.
Jane has no long term care insurance coverage.
Strategy
To transfer the annuities, via 1035 exchange, into a
Linked Benefit Annuity product.
Jane will leverage the $176,000 to $528,000 of tax free
LTC benefits.
– Monthly benefits over $7,000 per month for 6 year
NQ Annuities To Fund
Linked Benefits
Client Profile
Bill, Male, age 55; Excellent Health; Divorced. He has adult
children (beyond college) from his marriage.
Situation
Bill recently had to move his mother to a nursing home.
In dealing with his mother’s situation, he has great
concerns about his own fate if he ever needs care. He does
not want to be put in “one of those places”.
He also feels as though his children should never have to
worry about paying for his care.
A full review of Bill’s portfolio uncovers 2 old life insurance
policies with cash value.
Life Insurance Review
Policy #1
Policy #2
(taken out when Bill was a child)
(taken out when Bill was newly married)
Death Benefit: $25,000
Cash Value: $23,000
Death Benefit: $133,000
Cash Value: $77,000
$100,000
Strategy
To transfer the cash value from both policies, via tax-free 1035
exchange, into a Linked Benefit product.
The $100,000 premium deposit provides:
– $183,000 Death Benefit (Increase of $25,000)
– $549,300 Total LTC Benefits
(A monthly benefit of $7,629 for 6 years)
Think About It
If your clients could
SPEND 20 OR 30 CENTS
AND OBTAIN $1.00
OF TAX-FREE PROTECTION
Wouldn’t They?
“Do one thing every day
that scares you.”
- Eleanor Roosevelt
Can You Commit to Speaking With
One Client Per Week?
– Asset Repositioning
– Extended Care Planning
– Get Started Now!
…Yes You Can!
Let’s Get Started by working together….
If Not Now, When?!
Execution is Everything!
Do it, now!
Believe in this concept! As always, your clients will
listen when they hear your sincerity.
Ask your clients “What do you think?”
They will be stunned!
“If you don’t like change, you’re going
to like irrelevance even less.”
– General Eric Shinseki, retired Chief of Staff, U. S. Army
What’s Next?
"You miss 100% of the shots you don't take."
— Wayne Gretzky
Take stock of the prospects you identified today
– What is your sales approach going to be for those
prospects? How can Zenith Marketing help?
Analyzing your client base with your Zenith
Marketing Sales Rep and focus on two areas:
– Wealthier Clients aged 50-80
– Clients aged 30-50 whose parents have significant
assets.
Your Customized
Action Plan
Mining Your Client Database for potential candidates – you
should already have 10-20 prospects.
We will develop together a customized case design for
each prospect.
Commit to working with your Zenith Marketing Sales Rep to
develop a sales approach and case design for each prospect.
Setting our expectations together, agreeing on timeline and
next steps.
Following through with your plan – we will help you every step
of the way.
Speak With
Your Best Clients
“Excellence comes from
human beings doing things of value
that clients find memorable.
Remember.
You are the only human being
in the world who can help
this particular client at
this particular moment in time.”
–Tom Peters
Speak With
Your Best Clients…
Talk about the need for a review of their retirement
security plan.
Ask your younger clients about their parents –
do they have a plan in place?
– This is an excellent opportunity to offer value to
your younger client base – they do not want to be
left with this burden!
Client Workshops
A 30 minute live presentation with your clients –
Zenith Marketing Group will provide support as you
need it:
– Organizing the event
– Planning a date
– Location: Your office or location of your choice.
– Presentation – We will be there to help!
Small groups of 5-10 clients
“We have a ‘Strategic’ plan.
It’s called doing things.”
– Herb Kelleher, founder, Southwest Airlines
Your 8 words or less?
Mine would be:
“I provide guaranteed security when it’s most needed.”
Give your Zenith Marketing Group
Sales Representative a call now…
(800) 733-0054
Thank You For Sharing Your
Time With Us Today!