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Episode 89: Retirement Planning And The Role of Life Insurance

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Should every advisor ask their client the “mortality question” when they build a retirement plan? Bobby Samuelson,  Executive Editor of The Life Product Review, says we all should. Join us today as we explore the complementary roles that life insurance and annuities can play in retirement planning.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

EPISODE TRANSCRIPT:

Intro:

Welcome to That Annuity Show the podcast that will make you an expert in explaining annuities to your clients. Give us 30 minutes each week and we’ll shave hours from your client presentations. Now, here’s your host, Paul Tyler.

Paul Tyler:

Hi, this is Paul Tyler. And welcome to That Annuity Show. And today, we have a full complement of our co-host. Mark, welcome.

Mark Fitzgerald:

Good morning, Paul. How are you?

Paul Tyler:

Good. Will, good to see you. We’re spending a lot of time be together on products and offers across all kinds of interesting sales and compliance issues. Right?

Will Moorcroft:

Yeah. Time well spent. Good to be here, Paul.

Paul Tyler:

Yeah. And of course, Ramsey, what would the show be without you? And you brought a very interesting guest with you today.

Ramsey Smith:

All right. Thanks Paul. As always, love being here. And today we’re joined by Bobby Samuelson. And this is a great opportunity for us. I think we’re what? Episode 86, 87. We’ve talked about a number of things. We have not had as very many product experts with the level of sort of depth of expertise that Bobby has. So I’m expecting this is going to be a very interesting conversation.

Ramsey Smith:

Just a little bit of background on Bobby, he is the founder and editor of the Life Product Review. In my discussions with him and having read some of his material, I would describe Bobby as somebody that’s both a builder of product, a very established builder of products, but also, and this is very interesting, a very skilled decoder of products as well. And for that, I think we’re going to have a lot of interesting things to talk about today. Bobby previously been a number of places most recently before founding LPR, if I can call it that. [crosstalk 00:02:05]. Was working at working at MetLife where he had a variety of roles. So with that, Bobby, I’m going to hand it off to you. And tell us a little bit more about yourself and what brought you to this sort of the specific passion and how you executed in the market?

Bobby Samuelson:

Yeah. Great to be with you guys. I’m a big fan of the show so Ramsey, thanks for reaching out and asking me to be on. How did I get here? I don’t think anybody in the insurance industry has like a great story for how they got in the insurance industry. I mean, nobody wakes up and says they want to do this for a living, at least as far as I know, and I’m no exception. I’m a third generation in my family in the life insurance world. My dad started selling insurance in ’82. My mom started selling insurance. She was actually Rookie of the Year at Principal before she had me. And then her dad was also an insurance agent. He started selling insurance in the ’60s. So I kind of grew up in an insurance family, I mean, it’s definitely in my blood.

Bobby Samuelson:

I took a different approach, I’m more mathematically minded. I liked statistics, that was kind of the first thing in school that I got interested in. And so, when I graduated college, I got a job at NFP, which at the time was the largest distributor of life insurance in the country. And I will never forget, I sat down and ran my first life insurance illustration and I thought, “Where did all these numbers come from?” And I turned to the guy sitting next to me and I said, “What is this?” And he said, “Oh, it’s just some actuarial stuff.” And from then on out, man, I’ve been passionate about it ever since. I love insurance product. Life insurance is kind of my first language.

Bobby Samuelson:

So I spent a couple years in NFP. Went and started my own company, did five years, basically, independent consulting on the life insurance side. Went to go work at MetLife in the life insurance area but as the whole Brighthouse/MetLife split happened, I ended up with a lot of annuity responsibilities as well, running product development and pricing for life insurance and annuities. So I kind of speak annuities as a second language. Left there in 2017 and now I’m doing the Life Product Review like you said, writing an article kind of once a week for a technical audience for life insurance. I give 50 to 60 presentations a year, do some consulting work. And then, like you said, I do some product development work on the life and annuity side as well. So that’s a brief overview of my background. Like I said, I’m happy to be here and I’m excited to talk about product with you guys.

Ramsey Smith:

Fantastic. So tell us a little bit about sort of Life Product Review. And you said you write every week. I do.

Bobby Samuelson:

I do.

Ramsey Smith:

First of all, it’s a lot of topics. That’s 50 topics a year.

Bobby Samuelson:

Yeah.

Ramsey Smith:

First of all, how do you figure out what to write about? And what are some of the more recent important topics you’ve covered?

Bobby Samuelson:

Yeah, great question. Early on, I was worried about having enough to write about and so I kind of keep a running list of topics that I know that are kind of rolling around my head and that if push comes to shove, I’ve got to write an article, I know I can sit down and write an article on that. So I kind of keep a list of 20 to 30 topics on that. And it’s all sort of product related life insurance stuff. I don’t write about annuities unless there’s kind of a intersection between life insurance and annuities.

Bobby Samuelson:

And so, one of the things I’ve found in the business is that a lot of people who are on the annuity side know little to nothing about life insurance and a lot of people on life insurance side know little to nothing about annuities. And I remember this sort of enshrined at MetLife because when I took over both departments and merged them together, we had an introductory meeting for people to meet each other on the life insurance and annuity side, that’s how separated it was.

Bobby Samuelson:

So anyway, I’ll write about annuities occasionally. But in terms of topics, carriers are coming out with new products all the time. Lincoln, for example, rolled out a few days ago, their new MoneyGuard product, it’s market advantage, it’s got a VUL component to it. I’m going to write a review of that product. There’s been a lot of tax law change this year, section 7702 changed at the end of last year, beginning of this year. Tons to write about there. I mean, I’ve probably written four articles on that so far this year. Sales pitches that I see, I write articles about that. I mean, it’s kind of a continual list. And each article’s two to 3000 words, so they’re not exactly short articles either, but I love to write so it’s one of my favorite things to do and I’m never short.

Bobby Samuelson:

I feel like in an industry that, for outsiders, they probably feel like it never changes, for me as an insider, I feel like it’s changing all the time and there’s always, always, always something interesting to write about. So yeah, that’s how I keep it active. And I say it’s an article a week and it usually ends up being about 75 articles a year, is kind of how it plays out. So it actually ends up being a little more than once a week.

Paul Tyler:

Yeah. Bobby, thanks for joining us. I’ve heard just great things about the work you’ve done from a variety of people, including people who’ve worked with you and for you there at Met.

Bobby Samuelson:

Thanks.

Paul Tyler:

So thanks again, just to extend my thanks for being on here. Normally, most of our guests, you say retirement, annuities or some derivatives is sort of your natural go to product.

Bobby Samuelson:

Yep.

Paul Tyler:

However, kind of like you, I’ve worked across in some of these product lines and retirement’s got a really unique place in retirement planning. And what I’d be interested to understand from your perspective is how is that role shifted through this pandemic as, number one, we haven’t had underwriting on annuities, but life insurance has had to adapt and obviously, if you’re talking about retirement life insurance, you’re talking about older people who’ve got very different set of health risk? So can you just kind of tell us, big picture, what happened in the last year here?

Bobby Samuelson:

Yeah. I mean, there’s a lot that happened last year. But I do think underwriting is a big kind of… Carriers had to react very quickly. And so, if you look back three, five years ago, carriers started to implement these accelerated underwriting programs and they were sort of… Carriers were treading very lightly on that space. They would roll out a program. They might have it for just certain age brackets, certain face amounts. They would kind of create this little world where you could do these accelerated underwriting programs.

Bobby Samuelson:

When COVID hit, they basically had to figure out how to funnel a lot more of their business through those processes. And so, one of the big things we’ve seen as a direct reaction to COVID, besides all the product stuff and there’s been a ton of product stuff going on last year in the last 12 months, but in terms of underwriting, carriers have really had to figure out their stance on accelerated underwriting, how to issue policies without the traditional information, how to do it without a pyramid. I mean, that’s another big piece of the puzzle.

Bobby Samuelson:

And I think one of the big upshots, and I’m a big believer that disruption creates innovation, which, by far, I’m not the only person who believes that, but here we can see a clear example of that where carriers were disrupted in their normal underwriting processes and the experience carriers have had enforcing things through accelerated underwriting will be a benefit for the long run for clients because carriers kind of had to take the plunge. And so, I think, last year, that was a big story of how the pandemic directly impacted life insurance.

Bobby Samuelson:

And to your point on the retirement side, for life insurance, you said it well, annuities are typically thought of as kind of the retirement vehicle, but there’s a whole cottage industry on the life insurance side trying to use life insurance for retirement planning. And one of the big hangups for using life insurance for retirement planning is the underwriting process. You don’t have to be underwritten for an annuity, but you do have to get underwritten for life insurance.

Bobby Samuelson:

And so, last year we saw this explosion of sort of quick issue programs without a pricing penalty that is now becoming very prevalent in the market and even up to some pretty high face amounts. And that’s kind of making life insurance an easier transaction from a financial advisor to position for retirement planning alongside of an annuity, or potentially, in some cases, in lieu of an annuity, which we can talk about, and obviously, drop ticket asset management transactions. Life insurance is now a little bit more on an equal playing field because of these accelerated underwriting programs. And again, had it not been for the pandemic, it would’ve happened, it just would’ve taken 10 years and instead, carriers had to do it last year. Yeah.

Will Moorcroft:

Hey Bobby.

Paul Tyler:

Yeah?

Will Moorcroft:

Do you think that the pendulum’s going to swing back or find some equilibrium in the middle? What’s your forecast?

Bobby Samuelson:

Will, that’s a great question. So it’s interesting, carriers took the plunge and now you’re starting to see some people kind of say, “Whoa, whoa, whoa, whoa. Maybe we’re relying on this type of data too much. Maybe we jumped too quickly to certain conclusions about the efficacy of certain models. Maybe we didn’t catch as many smokers as we thought in the underwriting process.” I mean, there’s a lot. This is really complicated stuff.

Bobby Samuelson:

But I will say this, will the pendulum swing back? No. But I think you will see carriers sort of refine. And it’s not so much they’re going to change the program, they’re going to change the box that they allow it in. Maybe you don’t want 65-year-olds, you just want 60-year-olds. Maybe you don’t want over a million dollars, you’re just going to keep it to this kind of sub $1 million range. So it will, of course, kind of come back a little bit, but I think a lot of it’s permanent and I think a lot of carriers have figured out they can do it and again, they’ve forced the process and now they like the process and they want to stick with it. They’ll just refine it over time.

Ramsey Smith:

Can I ask you question about that though? So the quick issue that you mentioned, so some of it is COVID driven within the legacy industry.

Bobby Samuelson:

Yep.

Ramsey Smith:

There are a lot of challengers that have come in, whether… I don’t know. Like Dayforward is a company that we featured in a prior event here on this show and others are coming in and are doing this as innovators in this space. So I guess, how much of the quick issue market you think will be driven by one force or another? And is there one you think is getting it more right than the other?

Bobby Samuelson:

Yeah. Great question. And I’m not an underwriting expert by any means so I don’t know all the details of all the different programs, but I will tell you this, behind every accelerated underwriting program, almost without exception, and there are a couple of exceptions in the market, but behind every one of those programs is a reinsurer. And so, a lot of what get… So it’s kind of like factories in China, right, somebody told me recently, you buy a mattress from any of those shipping mattress companies and they all come out of the same factory, right, they just put them in different boxes. That’s a little bit of what’s going on in this accelerated underwriting market is the reinsurers were the first ones to kind of step up and say, “Hey guys, you can do this.” They go on for part of the risk.

Bobby Samuelson:

And those models, which again, most of the time are affiliated with a reinsurer and have a risk management arrangement on top of it, sort of feed into all of these different packages that we see out there. One reinsurer even has a white label company that literally all they do is just put products on their own paper and then white label it for distribution firms to make it look like it’s their product. So there’s a common set going on behind that and that common set is feeding the startups and it’s feeding the established players.

Bobby Samuelson:

I’ll tell you where the startups have an advantage though, is the rest of the process can be very clunky at the incumbents. Something as simple as e-signatures, some carriers are still struggling to figure out how to pull this off.

Ramsey Smith:

Really?

Bobby Samuelson:

Yeah.

Ramsey Smith:

Will, is that true?

Bobby Samuelson:

I mean, it’s-

Will Moorcroft:

Yeah. Yeah, it is. It is. It’s a challenge. But to Bobby’s point, I mean, this has forced the hand a bit, the pandemic. But people are still struggling with this, yes.

Bobby Samuelson:

Yeah. I mean, you’d be ama… Especially on the life insurance side, there’s just a lot of thinking that goes something like this, “If I loosen up this requirement, I will immediately have people who know it and take advantage of it. And so, I have to be very careful about that.”

Bobby Samuelson:

So anyway, Ramsey, to your point, I think the incumbents are more willing to think more critically about some of those assumptions, about the overall process. I’m sorry, the new companies are willing to do that. The incumbents, I think, are going to catch up though, and there are already some really cool partnerships going on. I mean, I’ll highlight, not just because I used to work there, but I highlight the Brighthouse Policy Genius pair up on that term insurance contract. I had lunch with Jordan Teel, the guy who kind of spearheaded that at Brighthouse, last week. And it’s amazing to hear about how this incumbent insurance company basically pushed off. They had some issues with processing that they could now push off onto a firm like Policygenius and get some term insurance policies issued in a new way that would not have worked had it just been Policygenius and had it just been Brighthouse. So I think we’re going to see more partnerships like that going forward. And I think that’s really encouraging.

Paul Tyler:

And that’s an interesting one. Will the life insurance industry start to adopt more of an MGA model, like the commercial side, or is it kind of back to the future? Right. You get a GA contract in 1910 and you were doing the underwriting and doing all the servicing for the policies. Right?

Bobby Samuelson:

And I think that’s a very interesting question because that is what’s happening with that deal and it’s working really well. These things are always changing, there’s always something to write about and that’s one of them.

Will Moorcroft:

Hey, Bobby, [crosstalk 00:15:01] what are you thinking or what are you seeing on the product development front for life insurance given what we just talked about, given COVID, given changes in underwriting or accelerated underwriting, et cetera? Where do you see that going?

Paul Tyler:

And just as a follow-on, we’d be really interested in the senior market.

Bobby Samuelson:

Yeah. Oh my gosh. That’s a whole different animal. And honestly, Paul, I’m not as much… That market is… It’s interesting, when you look at the traditional life insurance market, to your point, like you made the joke about the GA contract to 1910, well, that’s with a career company. Right. So I feel like the market has really fragmented in a lot of ways and you get these sort of self-identifying or these sort of self-sustaining universes. So there is a career universe, there’s kind of a BGA universe that really serves, honestly, more financial institutions these days than independent agents. I mean, they still do both, but a lot of it is serving financial institutions. And then, you’ve got the kind of multilevel marketing side of things. And then you have the senior market.

Bobby Samuelson:

And they don’t really cro… I mean, there is some crossover, but it is not as much as people think. And so, anyway, that senior market which is growing dramatically, there’s been a ton of M&A in that space.1 I mean is a lead gen market. That is a middle market solution. And there are certain companies that have just cracked the code on that. But anyway, that’s not my world. I live more in the kind of BGA financial institution and career agency kind of side of things.

Bobby Samuelson:

So in terms of products, it’s been an interesting year, right, and so when we talk about silos, there’s kind of the annuity life insurance silo, to some degree, there’s also kind of the product and underwriting silo. So one of the things that has not happened, which you might have thought would’ve happened, is that there would sort of be this intersection between, “Hey, we’re making changes on underwriting. How do we also make changes on product?” They really haven’t done that. What they’ve really done is kind of applied the underwriting to the product and you haven’t seen it really go the other direction where you’re seeing products for underwriting.

Bobby Samuelson:

Now it’s starting to change. You’re starting to see some companies come out with some pretty interesting ways of sort of combining an underwriting program with certain policy constraints. But that’s very uncommon. The main thing we saw in product last year was sort of the low interest rate environment, I’ll call it the shock low rate environment, that sort of plummet in March, percolate out through product pricing. So for example, on the indexed UL space, every single company except for one dropped their cap last year.

Bobby Samuelson:

Well, why did that happen? Two reasons. Number one is rates dropped, earned rates dropped. That’s going to pull down on the portfolio reel. That’s part of it. On the life insurance side, it’s not as quick of an impact as on the annuity side. But the other reason is option prices got very expensive, volatility popped and more importantly, volatility skew popped. And so, we had this incredibly expensive option environment. The best selling product in the industry on the life insurance side besides whole life is indexed UL, so that went straight to the heart of indexed UL. And then on top of that, a new kind of more punitive regulation also hit indexed UL. So there’s been a lot going on in terms of product around COVID, but not directly related to COVID. And the big story is basically that indexed UL now has a lot of headwinds that it didn’t use to have. So we’re kind of seeing the dimming star of indexed UL. We’re seeing the rising star of variable UL, companies are investing in the future of VUL. That change really got accented last year-

Paul Tyler:

Interesting.

Bobby Samuelson:

… or emphasized last year. Yeah. And then the last piece is 1910 GA contract, I’ll use your example again, well, what product did that cover? That covered whole life. And everyone keeps counting whole life out, and the reality is whole life is still the dominant permanent product sold in the industry. It had a great year last year and with the 7702 changes, it’s set up to have a great year this year. And so, part of the other big story was, last year, everybody called, “Oh, dividend rates are going to drop and this can be a huge problem for the big mutual companies,” that didn’t happen. Mutual companies were healthy, they sold a bunch of business, dividends held up and whole life, I think, emerged sort of unscathed from an environment that took a big whack at its main competitor, indexed UL.

Bobby Samuelson:

So it was a crazy year in product, but I think it kind of capped off a decade of trends and it was an inflection point to me. I mean, it really did mark kind of the end of this IUL dominance or this IUL growth and the start of something else. Not to say IUL won’t be a part of that, but last year really did. There was a line that got drawn last year and the world seemed to shift. And so, going forward, we’re starting, I would argue, probably a new decade and that delineating mark is 2020, which just happened to be COVID.

Mark Fitzgerald:

Bobby, how about from an agent perspective? Given the accelerated underwriting, have you seen more traditional annuity producers moving more towards life products because of that? Or do you think that trend will continue going forward?

Bobby Samuelson:

Yeah, that’s such a great question. Short answer is yes. And it’s not just traditional annuity producers, it’s also financial advisors and institutions that are traditionally used to kind of dropping a ticket and now they might be willing to do more life insurance. Anybody who tells you that that’s a wholesale change and it’s completely upended the industry, that’s not true. We’re clipping around the margin here. The reality is underwriting is definitely an impediment to life insurance. There are other impediments to life insurance that I think are equally, potentially, as challenging. And so, has it been a wholesale change? No, but have we started to see the first moves towards some of these producers now being willing to sell life insurance because of accelerated underwriting and frankly, because the alternatives don’t look as good anymore. So they’re willing to kind of look at life insurance? Yeah, we’ve started to see some of that happen.

Mark Fitzgerald:

What are some of the other impediments that would be a barrier of entry for producers coming in?

Bobby Samuelson:

Yeah, sure. So when you sell a life insurance policy, you are selling a recurring premium product that needs to be managed very closely. So if you’re a financial advisor and you’re a fiduciary, you’re looking at this life insurance policy and you’re saying, “Wow, this thing is complicated, it’s got a lot of moving parts. How do I make sure that I provide good advice on this product?” So I think the complexity of the product is one angle. The compensation is another angle. I think for some, especially fee based or fee only advisors, the fact that life insurance pays huge, heaped upfront commissions, can be a challenge.

Bobby Samuelson:

Now for some other advisors, that’s an inducement so they want to sell that. But no matter what way you cut it, it also means the sort of like the liquid value of the contract is pretty low in the first few years. And so, one of the challenges is you tell a client to put $50,000 in, and they’ve got $5,000 of cash value. There’s no other product out there that looks like… I mean, people complain about surrender charges on annuities, you put $50,000 into an annuity, you got $43,000 of cash value, more than that, in the first year. Put $50,000 in a life policy, you got 2,500 bucks.

Bobby Samuelson:

So I think there’s sort of a barrier there, it’s complexity, it’s commissions, it’s surrender charges and then it’s underwriting. And the underwriting piece is kind of getting solved, but the rest of it is still there. The fact is we need to make simpler products that are designed more for that market like we’ve seen annuity companies do with fee based annuities, that has not happened in the life side, it’s still traditional, we’ll call them B-share life insurance policies. That’s still a predominant thing sold in the-

Paul Tyler:

So Bobby, let me ask you the same question Mark did just with a little different slant. I’m an FIA producer, I’ve been in the business for 20 years. This stupid pandemic just kept me out of the seminar business. I’ve got this enforce block of clients. I probably have, I don’t know, maybe a hundred people I’ve talked to in the last couple of years. If I were to take your advice and look at life insurance, what are the first two or three ideas you’d have for me to go back to these clients and get a second sale?

Bobby Samuelson:

Yeah. Life insurance isn’t right for every client. So one of the things I worry about, and I can say this because I don’t sell insurance and I’m an independent guy, I worry life insurance sometimes is oversold, but there are situations where it can make a lot of sense. So let’s take that FIA block, I’ll bet you, some of those clients don’t really need that income and what they really want is a legacy for their kids. And so, to the extent you’ve got sort of legacy estate planning issues floating around there, annuities are not a fit for that, life insurance is a fit for that.

Bobby Samuelson:

So in my mind, it’s when you’ve got older clients who own a mature annuity, the question now is what are you going to use and what are you going to leave behind? And I’ll quote a study from BlackRock that basically said clients don’t spend enough money, that’s sort of what it says, because they’re so concerned about leaving a legacy to their heirs. And so, one way to use life insurance for older folks like that is to say, “Look, you’ve kind of locked down your legacy, go on ahead and get a death benefit that you’d be happy for your kids to have and that’ll free you up to spend a little bit more liberally elsewhere because you know that your legacy is insured.” So I think there are angles like that.

Bobby Samuelson:

Now, kind of roll it back and say, we’ve got a younger clientele, you’ve got annuity producer who’s looking at annuities versus life insurance, I see a lot of life insurance guys selling life insurance like annuities. And I think that’s where it gets a little bit tricky is because you get guaranteed income in an annuity, now, depending on the structure, right, but you can have guaranteed income in the annuity, and you have sort of non guaranteed income in life insurance, but the rates look so much better on life insurance right now versus an annuity.

Bobby Samuelson:

So what I see is annuity advisors trying to kind of figure out, “Well, how can I sort of sell a life insurance policy instead of an annuity?” The commission can be higher. Potentially, it even looks better for the client, but you’re kind of giving up on guarantees in the process. And I think that’s kind of a tricky balance for folks that are used to selling annuities, because to the extent you have been selling guaranteed income, you can’t really do that in the life chassis, but you can get it tax free out of the life insurance policy and the rates look better. So it’s a balancing act and I’m seeing, potentially, more and more advisors trying to kind of sell both is kind of what it comes down to.

Paul Tyler:

So Will, compliance hat on, what would you add, would you modify, would you-

 

Will Moorcroft:

Well, Bobby said it right off, life insurance isn’t for everyone nor is an annuity. But I think what we try to do and what an advisor should do is take each individual circumstance on its face and see what clients’ objectives are. And if it’s legacy, I like what Bobby said and it’s really good to think about, if you’re trying to save your money to give a pot of money to your kids when you can buy life insurance, I mean, that’s a conversation that needs to have. I mean, what are your objectives with your estate planning? I mean, all these are valid.

Will Moocroft:

And it’s interesting that Bobby discussed using life insurance like a life insurance retirement plan of some sort where you can take tax-free loans out. I think as long as you’re clear with your clients and they understand that they’re taking loans and that they’ll need to keep that policy enforced or they potentially can have a problem, I mean, all of it comes back to transparency, figuring out what your client wants. But there’s a lot of moving parts. And the compensation issue that Bobby mentioned as well for fiduciaries plays into it too. At least my thought process on it is to make sure that clients understand the discussion. But why not have a life insurance discussion while you’re talking about annuities and compare and contrast them and how the interplay might work for their objectives?

Ramsey Smith:

Yeah, I was fascinated listening to that, Bobby. And in my view, I mean, to me, I wonder, have you ever written about that specifically? Because I see it as sort of an if/then statement, right, sort of like if you want this, then that. And a consideration is commission may be different, so you should know that. In some sense, the decision tree can be sort of put out there so that you can sort of backfill for clients for which it makes sense in a way that it’s fully disclosed.

Bobby Samuelson:

Yeah. It’s a great idea.

Will Moorcroft:

Yeah, it’s not a one proposition, maybe it’s both. It’s an opening to have the conversation. And I think what happens is people get comfortable with what they sell and what they know and that, to the detriment of the consumer.

Paul Tyler:

Yeah, it-

Bobby Samuelson:

I completely agree. That’s what I see all the time is people get into a groove and they kind of… They get a hammer, so everything looks like a nail. And that’s kind of what people do. But I’ll give a little bit of in defense of that. I randomly get phone calls from people, like just folks who find me on the internet, the clients who have been pitched life insurance deals. So I got one pitch recently, very high-end advisor in Houston, fiduciary, very successful, working with this very high net worth client elsewhere in the country. And the client is the one that reached out to me and he basically said, “This guy’s a fiduciary, he does everything for me, but now he’s pitching this life insurance deal to me.”

Bobby Samuelson:

And so we got talking about it and I ended up getting on the phone with the advisor and what became very clear sort of right away was this advisor was an expert in investments and really didn’t know much about life insurance, hardly anything about life insurance. So I think one of the challenges, and maybe one of reasons why people stick with what they know is because they don’t feel like they can fully understand everything.

Bobby Samuelson:

And so, that’s why I’m a big fan of the sort of teams based approach, where you’ve got a financial advisor that’s partnered with other financial advisors who may be experts in other things, that now a financial advisor can identify the need and refer to the expert on the team. And I think that works really well because one person fully understanding financial planning, investments, annuities, life insurance, disability, long-term care, hybrid products, structured products, we’re increasing seeing structured products being put, putting that all under one… And not to mention estate planning, business planning. That’s a lot to swallow.

Bobby Samuelson:

And I think that’s part of the reason why people just sort of say, “I’m comfortable with annuities.” And for example, in an FIA, “I know my client at least can’t lose money. You can’t say the same thing for a life insurance policy so I’m not even going to have that conversation because I’m not an expert.” And so, it’s always that kind of balancing act of how do you find people who are experts? What are you an expert in? And I respect guys who say, “I’m not an expert. I’m not going to talk about it.” There is something to that, but you have to go farther and then have to say, “And let me refer you to where you can get more expertise here.” And I think that’s the missing part that a lot of times doesn’t happen and should.

Mark Fitzgerald:

So Bobby, for agents and producers that are looking to really get into starting to do more production in life insurance, is there a standard kind of rule of thumb in terms of when to use which type of chassis, a whole life versus a universal contract?

Bobby Samuelson:

I wish. I get a couple of questions pretty regularly, one of them is that question and the other question is, “Can you put a grade on a product?” And the answer to both of those unfortunately is no. So if you think about universal life, universal life is a flexible premium product. You can use it any way you want to, you can overfund it, you can underfund it. You can use it like term insurance. You can do whatever you want to do with it. And again, this is where it’s hard for advisors, I think, to kind of make that recommendation because there’s so many different ways to use the product.

Bobby Samuelson:

But if I was a financial advisor and I was thinking about selling more life insurance, look, just have an uncomfortable conversation about mortality, which is way easier said than done. But every single client that you work with, whether they’re annuity, investment, whatever, you should ask them about life insurance to at least make sure they’re covered. Doesn’t have to be the perfect policy. But the one conversation you don’t want to have is with the client’s spouse or partner after they have passed unexpectedly and that spouse or partner looks at you and says, “Tell me about the life insurance,” and you say, “I didn’t really bring that up because I don’t like having uncomfortable medical conversations with my clients,” or, “I’m very comfortable talking about investment risk but not mortality risk so I didn’t really bring it up.”

Bobby Samuelson:

And there’s a great story, and one of the first stories I heard working at MetLife, was I went to go visit a firm and they had had a top advisor who had drifted more towards the investment side of the world and quit talking about life insurance. And this guy, the patriarch of a big family up in Boston had died. And the matriarch looked at the financial advisor and said, “Now, tell me about the life insurance.” And he said, “What life insurance?” And the next words out of her mouth were, “You’re fired.” End of story. So I think a lot of financial advisors, again, they get comfortable with what they’re doing, doesn’t mean you have to be an expert in life insurance, but you should be having that conversation and bringing it up.

Bobby Samuelson:

And the other thing is, look, now that we’ve got Biden in office, I’ve seen the tax plan, there’s going to be a lot more discussion around income tax planning and not just deferral. But the fact that you can get tax-free income out of a life insurance policy, I don’t know what the amount of the income is, but the fact that income can be taken from a life insurance policy on a tax-free basis should warrant a discussion no matter what. I mean, in terms of tax planning, that should be an option on the table. The client may ultimately say, “The cost of the life insurance isn’t worth the tax benefits,” they may say, “I really just want protection, I don’t need the income tax play,” but at least having that discussion with clients, I think, is really important.

Bobby Samuelson:

And these changes to 7702, I think, make it a little bit easier to have that conversation now, because the limits have been increased. You can put more money into life insurance policy than you used to without triggering adverse tax treatment. Marginal impact on the effect of the policy, but it’s a good time to have a conversation with a client because something changed. And shoot, in life insurance, our tax treatment hasn’t changed in 40 years and it just changed this year. So that would be my advice is, again, have that mortality conversation, have that tax conversation, see where it goes.

Mark Fitzgerald:

Great. Great perspective. Thank you.

Bobby Samuelson:

Yep.

Paul Tyler:

So let’s see. [crosstalk 00:32:35]. Go ahead. We’re at the close, almost at the end here. I don’t know, Ramsey, final questions?

Ramsey Smith:

Yeah, way more than I can go through here. I would love to have you back. Would be great to get your continued, ongoing sort of insights on what the tax changes mean. And then, this tension between life insurance or tension or sort of coexistence between life insurance, annuities, both as compliments and as alternatives, especially the alternatives one because that’s one, certainly, that I would learn from. I think it would be fascinating in terms of ongoing conversation. So thanks for what you shared.

Bobby Samuelson:

Yeah.

Ramsey Smith:

And you’ll hear more from me, I can promise you that, and probably for the rest of us.

Will Moorcroft:

Yeah, thanks Bobby. Great insights. Really appreciate it. Helpful conversation. And I think that what you hit home about the conversation regarding life insurance and how important that is for financial advisors is one that we have to emphasize.

Bobby Samuelson:

Thanks.

Mark Fitzgerald:

Yeah, no, Bobby, I appreciate you being honest. This is very insightful and look forward to having you back in the future.

Bobby Samuelson:

Thanks Mark.

Paul Tyler:

Yeah. Bobby, listen, thanks for the time. Great to actually connect with you. It’s interesting, all our paths sort of cross at some point. And yeah, as we all said, I’d love to have you back. I think the issues you brought up, I think, are going to be at the forefront of people’s worries. Taxes, sorry, taxes are not going to go down. I don’t think anybody will expect that unless… Mortality, yes, we’re all going to die and continue to die. And then, what do we do with interest rates? Right. And how does these products all address and solve important needs for people as they move through life? So, Bobby, thanks. Thanks so much. Let me ask you, what’s the best way for people to find your research or follow what you do and what the types of questions you pursue here?

Bobby Samuelson:

Yeah, sure. I try to make it as easy as possible, it’s www.lifeproductreview.com. Most of the content is for subscribers only, but there are a few public articles laying around, but that’s the way to find me, www.lifeproductreview.com.

Paul Tyler:

Excellent. All right. Thank you. And thanks all of you for listening to another episode of That Annuity Show. Please share the shows and episodes with your friends and give us all the feedback and give us suggestions on future guests we have on our show. With that, thanks everybody and have a great weekend.

Bobby Samuelson:

Thanks, Paul.

Outro:

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Nicholas BreniaEpisode 89: Retirement Planning And The Role of Life Insurance

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