By any measure, 2014 was a busy year for plan sponsors,retirement advisors and pretty much anyone else dealing, tracking or trying to comply with the Employment Retirement Income and Security Act. Next year promises to be just as hectic.
Supreme Court decisions, crackdowns by the Department of Labor and a shift in the political balance of power were among the big stories on the retirement front. And 2015 promises even more.
Here’s a look at some of the hot topics of 2014 and perhaps what we can expect in the year ahead.
1. DOL crackdown
Back in 2010 and 2011, when the private sector was still shedding jobs, the DOL’s Employment Benefits Security Administration was beefing up its enforcement personal. It’s done wonder for government coffers. In 2011, the EBSA extracted settlements totaling $1.39 billion. By fiscal 2013, that number had jumped to $1.7 billion, the result of more than 3,600 audits of qualified retirement plans. Typically,improper or incomplete disclosures got advisors into trouble, including failing to acknowledge that they are, in fact, acting as a fiduciary when rendering investment advice to a plan’s investment committee. What had the DOL most concerned are advisors who use their positions to generate additional fees for themselves or their affiliates. We don’t yet know what the tally will be for 2014. But it’s no doubt higher, given an estimate from Morgan Stanley that the EBSA has committed 87 percent of its bolstered staff to cracking down on fiduciary negligence. That’s a lot of violations.
2. Year of the 3(16)?
All of that regulatory action, to say nothing of civil suits, clearly moved sponsors to rethink their fiduciary responsibilities – and ideally shed some of that liability whenever possible. That sentiment helped paved the way for the rise of the 3(16) fiduciary. “It certainly was a transformative year for the concept in that it became widely visible and talked about, and it certainly captured a lot of media attention,” said Phil Chiricotti, the head of the Center for Due Diligence. The evolution was still finding its footing as the year neared its end. “Advisors are much less interested in this than the media reports would have you believe,” explained Chiricotti. Which is a bit surprising to him, because he thinks the designation provides a great conversation-starter for RIAs mining for new business. “I’m not sure RIAs fully believe in the 3(16) yet,” he said. “Some record keepers have the capacity, but for the independent service provider, there still are real questions as to whether it can be done.” None of which is to say that the marketing push by 3(16) service providers is going to ease in any way.
Read the rest of the story on Life Health Pro…
IRI Issues Third-Quarter 2014 Annuity Sales Report
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final third-quarter 2014 sales results for the U.S. annuity industry, based on data reported by Beacon Research and Morningstar, Inc. Industry-wide annuity sales in the third quarter of 2014 reached $56.9 billion, a 5 percent decline from $59.9 billion in the previous quarter and a 1 percent dip from $57.5 billion in the third quarter of 2013.
Variable annuity total sales were flat in the third quarter of 2014, according to Morningstar, coming in at $35.2 billion. This was a 1.1 percent decrease from $35.6 billion in the second quarter of 2014, but a 0.4 percent increase from nearly $35.1 billion in the third quarter of 2013. After rising to the highest levels in five years, fixed annuity sales cooled off in the third quarter of 2014, dropping to $21.7 billion, according to Beacon Research. This was a 10.7 percent decrease from $24.3 billion in the previous quarter and a 3.5 percent decline from $22.5 billion in the third quarter of 2013.
“Ebbs and flows are normal in the course of an established and mature industry, and the numbers in the third quarter reflect that,” said Cathy Weatherford, IRI President and CEO. “At the same time, mature does not equate to stagnant. This is a market that continues to innovate. The emergence of deferred income annuities over the past few years is a perfect example. Barely a blip in sales a short time ago, sales have since grown to $1 billion in 2012, to $2.2 billion last year, and are on pace to post double-digit growth in 2014. We expect this type of ongoing innovation to contribute meaningfully to overall sales as time goes on.”
According to Beacon Research, sales of all types of fixed annuities decreased from the previous quarter, yet sales of indexed annuities and income annuities remained well above their levels for the same period in 2013. Indexed annuity sales reached nearly $11.7 billion during the third quarter of 2014, a 9.6 percent drop from $12.9 billion in the previous quarter but a 16 percent rise from sales of nearly $10.1 billion in the third quarter of 2013. Likewise income annuity sales reached $3.11 billion during the third quarter of 2014, an 8.3 percent drop from $3.39 billion in the previous quarter, but a 10.5 percent increase from sales of nearly $2.82 billion in the third quarter of 2013. For the entire fixed annuity market, there were approximately $9.5 billion in qualified sales and $12.1 billion in non-qualified sales during the third
Warren Buffett has said he’s willing to “put money” on Hillary Clinton winning the 2016 presidential race. Turns out, he really meant it.
The Oracle of Omaha gave the maximum donation allowed to Ready for Hillary last quarter, his first-ever check to the sort of independent political groups that he’s scorned in the past. Buffett, who is the third richest man in the world, gave $25,000, the most any individual can donate under the committee’s self-imposed cap, according to a person familiar with Ready for Hillary’s post-election financial disclosure report. The group has raised more than $11 million to finance its efforts to lay the groundwork for a Clinton presidential campaign. Their latest report is due to be filed with the Federal Election Commission by midnight Thursday.
The contribution marks a major shift for one of the country’s most famous business leaders, who’s long been known in Democratic circles as a bit of a political tightwad. Though he’s given hundreds of thousands to party committees and candidates, Buffett has shunned super-political action committees and other groups that can take unlimited sums.
Last cycle, he headlined fundraisers for Obama’s re-election, though he rebuffed solicitations by Priorities USA Action, a super-PAC supporting the president. “I don’t want to see democracy go in that direction,” he said in May 2012 when asked at his company’s annual shareholder meeting about his position on giving to outside groups. “You have to take a stand some place.”
Read the rest of the story on Bloomberg Politics…
U.S. health spending accounted for $2.9 trillion in U.S. spending in 2013, or 17.4 percent U.S. gross domestic product (GDP)
National health expenditure (NHE) grew a total of 3 percent between 2012 and 2013, and 2.9 percent per person. The total share of GDP going to health care held steady.
Micah Hartman and other analysts at the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) published the NHE data in a report in Health Affairs, an academic journal that focuses on health care delivery and health finance.
Households increased their health spending 2.8 percent, to $824 billion. The growth rate of household health spending was down from 4.8 percent. The federal government’s share of health spending held steady at 26 percent. State and local governments’ share fell to 17 percent, from 18 percent.
1. Spending on private health insurance premiums increased 2.8 percent, to $962 billion.
Spending on Medicare grew 3.4 percent, to $586 billion, and spending on Medicaid grew 6.1 percent, to $449 billion.
For private insurance, the growth rate was down from 4 percent in 2012.
Because health insurers were effective at holding health care spending down in 2013, the “net cost of insurance” — the difference between premiums earned and benefits paid — actually grew 5 percent, to about $174 billion.
Read the rest of the story on Life Health Pro…
Imagine yourself in your beautiful retirement paradise
It could be a pristine beach, an RV on the edge of an enchanted forest or a cabin high up on a snowy mountain. Sure, this all sounds amazing, but it might not be a great place to spend the Golden Years of your life. After all, there’s something even more magical about being close to family, having great health care facilities within minutes and other amenities that aren’t usually found in these remote “idyllic” retirement spots.
Because of the Great Recession and other reasons, some retirees are extending their working lives past the traditional age of retirement. According to a report from WalletHub and a survey from the Employee Benefit Research Institute (EBRI), 25 percent of respondents said they can’t afford to retire when they want or plan to. “Eighteen percent cited ‘inadequate finances’ as a primary hurdle to retiring on schedule,” says the survey.
And, more than half of workers surveyed cited cost of living and daily expenses as impediments to saving — or saving more — for retirement. What are some options for workers wanting to retire or retirees struggling to pay their daily bills? The report posits that relocating to a cheaper, yet comfortable, area might help out.
10. Peoria, AZ
Overall Rank: 10
Affordability Rank: 89
Jobs Rank: 67
Activities Rank: 43
Quality of Life Rank: 5
Health Care Rank: 10
Click here to see the rest of the 10 best places to retire in the U.S.
With the holiday season upon us, there’s no better time to celebrate the power of storytelling and narrative.
For financial and insurance advisors, stories provide one of the most effective means of selling the value of life insurance protection, with the power of narrative to reach an audience on simple and effective terms.
Storytelling is as old as mankind, but in the modern world it sometimes gets lost as advisors and clients hustle to their next appointment or put off thinking about asset protection until tomorrow. Yet, storytelling helps people to slow down, focus their minds and collect their thoughts.
It’s no accident that more personal stories are showing up on insurance-carrier and advisor websites as a way to connect with potential buyers.
Penn Mutual has eight stories listed on its website. Each story illustrates Americans at different stages of life, how life insurance coverage might fit in with the changing needs of individuals and families, and the peace of mind that insurance protection offers.
More carriers and advisors are turning to video to let policyholders tell those stories as well.
“What is it about a story that is so powerful? Why should you listen to your clients’ stories and share yours as well?” asked financial planner Charles R. Hale in a blog post.
Advisors miss the point, Hale writes, when they boast about how important their clients are, how many clients they serve, the amount of assets they manage, how many magazine covers they’ve notched, or why prospects should invest with them.
“I don’t think there is anything wrong with that approach, but I was never comfortable using it,” Hale writes. “I was taught that it worked and for years it did. But the words didn’t speak to what was genuine in me.”
“Now I start with: ‘Mr. Prospect, I do financial planning, but I’m really a storyteller …’ And I proceed to tell a story about who I am. I may talk about my values, my visions or family. Then I ask my prospect to tell me a story about his life.”
Consumers don’t want brochures to tell them why life insurance coverage is good for them, according to Bobby Samuelson, vice president for life product development at MetLife. Samuelson spoke with InsuranceNewsNet in advance of the 33rd annual conference of the National Association of Independent Life Brokerage Agencies last week.
Read the rest of this story on Insurance News Net…
GOP lawmakers filed the lawsuit in federal district court in Washington the morning after Obama announced unilateral executive actions to expand protections for millions of immigrants who came to the U.S. illegally.
“If this president can get away with making his own laws, future presidents will have the ability to as well,” Boehner said in a written statement announcing the lawsuit. “The House has an obligation to stand up for the Constitution, and that is exactly why we are pursuing this course of action.”
The House authorized the lawsuit in a near party-line vote in July as congressional re-election campaigns were heating up. Democrats said Obama had acted legally and said the GOP measure was a political stunt aimed at motivating conservatives to vote and distracting them from calls by some to go even further and impeach the president.
The lawsuit was filed Friday against the departments of Health and Human Servicesand the Treasury.
It accuses Obama of unlawfully delaying the health care law’s requirement that many employers provide health care coverage for their workers.
Read the rest of this story on Insurance News…
Whether it’s ketchup or ice cream or more recently batteries, Warren Buffett‘s Berkshire Hathaway is a powerhouse, managing a stable of more than 80 businesses. Its stock trades at more than $210,000 per share.
And if Berkshire Hathaway is legit, then Buffett — the company’s charismatic leader — is the real deal in business. At age 84, the man has a net worth of $66.8 billion, according to a recent report. Yes, you read that right. Billion. (Actually, it looks like he might be worth even more now…)
Buffett is the second wealthiest individual in the U.S., behind Microsoft co-founder Bill Gates ($81.5 billion) and ahead of Oracle’s Larry Ellison ($47.3 billion).
Buffett is as brilliant in business and investing as he is inspiring. Here are 10 of his best quotes, collected from his many letters to Berkshire shareholders and elsewhere around the web. Enjoy.
1. Give your mind some clarity.
“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.”
2. Never forget thy business basics.
“Price is what you pay. Value is what you get.”
3. Know what you’re getting into, before you get into it.
“It’s far better to buy a wonderful company at a fair pricethan a fair company at a wonderful price.”
4. Be smart — and realistic.
“I try to buy stock in businesses that are so wonderful thatan idiot can run them. Because sooner or later, one will.”
5. Don’t fake it till you make it.
“After all, you only find out who is swimming naked when the tide goes out.”
6. Always know who you’re dealing with.
“You can’t make a good deal with a bad person.”
7. Act with honor and integrity.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
8. Value what’s most important.
“Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.”
9. Hit the brakes when you need to.
“The most important thing to do if you find yourself in a hole is to stop digging.”
10. Be bold. Be confident.
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute. ”
Perhaps half of all pre-retiree and retiree U.S. households with assets of at least $100,000 are interested in converting assets into guaranteed lifetime income for retirement, according to a new study.
The survey published by LIMRA’s Secured Retirement Institute comes as consumers, think tanks, the insurance industry and government appear to be focusing on whether Americans are properly preparing for retirement.
A poll released earlier this week by CBS found that most Americans who are not yet retired have difficulty juggling savings for retirement and paying their bills, and 64 percent are anxious about the amount of retirement savings they currently have. The poll also found that 55 percent think they will ultimately be financially ready to retire when they want to; 41 percent do not think they will.
At the same time, a new study published by Brookings Institution determined that guaranteed lifetime income annuities, also known as Qualified Longevity Annuity Contract, or QLAC, can play a key role in addressing the growing concern that retirees will outlive their assets.
And, the IRS and the Department of Labor last week issued guidance that gives the go-ahead for QLACs to be sold to consumers through target date mutual funds.
Non-retired Americans, younger Boomers (age 50-59), and those with assets between $100,000 – $499,000 are most interested in converting assets into guaranteed lifetime income for retirement, the survey by the LIMRA Secured Retirement Institute found.
“Our research shows that these demographic segments are less likely to have a defined benefit pension plan and will have to rely on their own assets to create retirement income,” said Matthew Drinkwater, associate managing director, LIMRA SRI.
Drinkwater said the survey found that 10 retirees and pre-retirees say having enough money to last their lifetime is a top priority, and nearly two thirds want to remain financially independent in retirement.
“Converting assets into a guaranteed income product, like an annuity, is a good way to ensure these goals are realized,” Drinkwater said he concluded as a result of the survey.
Click here to read the rest of this story on Insurance News Net…
Independent advisors called this election, but their musings on the performance of the stock market remain a work in progress
A poll of 2,300 independent financial advisors by the Financial Services Institute (FSI) last spring found that 66 percent of respondents believed the Republican Party would win back the U.S. Senate. The finding led FSI President and CEO Dale Brown to declare that independent advisors had their “finger on the pulse of politics.”
“We congratulate all incumbents returning to service in Washington and in state capitals as well as all those freshmen who will begin their service,” Brown said in a news release.
“As Washington shifts its collective attention to issues such as tax reform and the retirement crisis, we will remain vigilant in our advocacy efforts and continue our constructive engagement with regulators as well as legislators on both sides of the aisle,” Brown said.
Asked last spring whether they believed the stock market would deliver a “strong, neutral or weak” performance for equities, 43 percent said the market would be strong, 49 percent said it would be neutral and 8 percent said it would be weak.
As of one week after the election, the Standard & Poor’s 500 index was up about 10.2 percent year-to-date.
The index returned nearly 30 percent last year. From 1928 to 2013, the average annual geometric return of the benchmark index is 9.55 percent.