We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the July 2017 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
Reprinted with the author's permission.
July, 2017 – 7 Ideas and Views Newsletter by Van Mueller
Beginning June 9, 2017 insurance and investment professionals who are providing advice to retirement plan participants must adhere to the Impartial Conduct Standard required by the regulation. The standard stipulates the following requirements. First, you must provide the best interest standard of care which combines ERISA's prudent man rule and duty loyalty. Second, an advisor cannot receive more than reasonable compensation. Third, advisors will not make materially misleading statements.
After June 9, 2017 if you deal with a rollover In Any Way you are an ERISA fiduciary.
It is expected that the Department of Labor will not enforce the rule before January 1, 2018: Please do it anyway. Anytime you do a rollover, anytime you use a required minimum distribution to purchase any other product you will be subject to these rules. Any time you write an IRA or 401K or any qualified money you should consider applying these rules whether it is required or not. Why? Because it will eventually be required for every transaction. I believe it will even apply eventually to nonqualified money.
Here are some things to understand. You will have to provide consideration of investment alternatives to the rollover. That consideration will require analyzing completely the fees and expenses of your plan. Its features, and all the different investment opportunities available under your plan. The services you provide will have to be explained in your document.
Sounds very imposing doesn't it? It is, but that's okay. The Department of Labor fiduciary rule requires us to provide a process of disclosure and discovery for our prospects and clients every time.
All great agents and advisors have a great process they adhere to.
Almost all of you were already fiduciaries, only you weren't doing all the paperwork. In order to be successful in our industry we must ALWAYS put our prospects' and clients' best interests first. I believe all of you do that.
These prospects and clients will need our help more than ever with the economic disaster that is forthcoming.
These prospects and clients will need our help more than ever with the economic disaster that is forthcoming.
We must not focus on any negative thoughts or ideas as they apply to this new regulation. The agents and advisors who embrace this regulation will find that their careers will reach heights they could not have even considered previously.
Why? Because so many of our brethren will reject the requirements as burdensome or unfair. The agents and advisors who make a decision to conform as quickly as possible to these changes will find enormous amounts of prospects and clients waiting to be helped who no longer have an agent or advisor who was unwilling or unable to make the adjustment.
Do everything you can to embrace these changes. Find a positive way rather than a negative way to perform the requirements of the regulation. You will be rewarded beyond anything you can even consider currently in your career.
Some questions need to be asked and answered about this new regulation for your own edification or at the very least an easy explanation to prospects and clients about why this regulation became enacted.
First, were all of you in the rollover business, ripping off your prospects and clients? Did you charge exorbitant fees for the service provided? Did you not provide the service? Didn't you do the best job you could to help your prospects and clients achieve successful retirement and financial results? Of course you did. Then why did the government characterize all of us as ripoff artists?
Then why did the government characterize all of us as ripoff artists?
It was not, I repeat, not because we were doing a lousy, or even a bad job.
The simple explanation is this: This is the beginning salvo of a complete government takeover of the pension industry. Our industry has built trillions of dollars in these accounts and the government has hundreds of trillions in shortfalls for Social Security, Medicare, Medicaid, Federal Pensions, etc. They Do Not have the money to keep the promises they have made for those programs.
Think in terms of government requiring all pension money being paid out as life time income with no inheritance for the family. Doesn't that sound like Social Security to you?
Ask your prospects and client this question: Does it seem like the government has been a responsible fiduciary in regards to your Social Security? Haven't they allowed other considerations to interfere with the stated goal of providing a retirement foundation for the American people? Isn't the unfunded liability for Social Security over $32 trillion and increasing rapidly? And that is with the bulk of the Baby Boomers retiring between 2022 and 2029. What will happen when that starts? What adjustments has the government made as our fiduciary to maintain Social Security solvency?
What adjustments has the government made as our fiduciary to maintain Social Security solvency?
Isn't Medicare even worse? Aren't the unfunded liabilities for Medicare now exceeding $100 trillion? How will our government discharge its fiduciary responsibilities to the Medicare program so that it will keep the promises it made to provide quality healthcare to our senior citizens?
Aren't they making a mess out of Medicaid? Over 70 million Americans now depend on Medicaid to provide some healthcare. That is around one out of every five Americans who are on Medicaid. In much of the healthcare adjustments being considered, massive reductions of the growth of Medicare are being recommended. This would be devastating both health wise and financially for the states. The federal government offers the program and then refuses to support it as the costs increase. Does that sound fiscally responsible to you?
Does the healthcare provided by the Affordable Care Act seem like they were constructed in a responsible fiduciary manner for the American people? Wasn't the Affordable Care Act slammed down the throats of the Republicans? Isn't the American Health Care Act being slammed down the throats of the Democrats? Do either of them improve healthcare or make healthcare more affordable for the American people?
Does any of this meet the requirement of what's in the “best interest” of the American people or is this more about what's in the “best interest” of special interests?
Let's talk about Defense. Did you know the Government Accountability Office (GAO) has been unable to audit the Defense Department for over a decade? They have no way of determining how and where money is being spent. That leaves no accountability for trillions of taxpayer money over the last decade. Are we getting our money's worth? Is this spending providing more safety for the American people from an ever more tumultuous and dangerous world?
Compare those issues to our fiduciary requirements and what we have supposedly done to harm the American retiree pales in comparison.
Could it be that the government is using a tactic to deflect criticism from their complete failure as fiduciaries for the American taxpayer?
Could it be that the government is using a tactic to deflect criticism from their complete failure as fiduciaries for the American taxpayer?
I'm not done. What about the banks? Have they been great fiduciaries of the American peoples' money?
Wells Fargo established 3.5 million fake accounts involving billions of dollars. Not one person has gone to jail.
Banks and lending institutions were directly responsible for the mortgage lending collapse of 2007 & 2008. They never learned their lesson. They are loaning trillions of dollars to students who may never pay back those loans. Subprime auto loans are even being touted as one of the causes of the next downturn. When all of this blows up again, who pays for it? Not the banks. Doesn't the American taxpayer pay for these atrocities over and over again?
Yet we are being harmful to our clients because we make a onetime commission?
What about the hundreds of trillions of dollars banks have invested in derivatives? Would those qualify under a “best interest” standard?
What about Wall Street? Don't we hear of ridiculous excesses every day? Do people who run these firms deserve hundreds of millions in salary and bonuses? Isn't that excessive under the “best interest” rule?
Many people on Wall Street and advisory firms around the country are already fiduciaries.
Do you remember Bernie Madoff? Just being a fiduciary in name does not make you a fiduciary. Really serving the “best interest” of our prospects and clients is what makes us a fiduciary. Keeping great records that show a process of discovery for our prospects and clients makes us a fiduciary. Full disclosure of all the risks and costs makes us a fiduciary. Making sure we help our prospects and clients achieve their financial and retirement goals with continuing involvement throughout the process makes us a fiduciary.
Passing additional licensing requirements and filling out more paperwork does not make us fiduciaries. We must serve our clients, the American people to our utmost ability. They really need what we do best right now. They are running out of time. Americans face enormous challenges that we must overcome if they are to achieve the financial and retirement success they hope for.
Americans face enormous challenges that we must overcome if they are to achieve the financial and retirement success they hope for.
Why did I take the time to tell you all of this? It's because my initial and ongoing reaction to the DOL fiduciary requirement was one of shock. In light of what I explained to you I felt picked on. I took it personally. I actually didn't believe it would ever be allowed to pass because I understood that there would be serious unintended consequences. Eighty percent or more of Americans would not be able to receive retirement advice from an insurance agent or financial advisor because our companies liabilities would be too extreme to even be able to deal with someone with less than $250,000 in assets.
When I see the trillions of dollars of rip-offs in the aforementioned examples and the regulatory agencies don't take action it is disheartening. It is more disheartening that the regulators believe my commissions are preventing people from having decent retirements yet they take no action about all the other issues I have addressed.
Taking that attitude won't help me and it certainly won't help my prospects and clients.
We must embrace these new requirements. Those that do will be greatly rewarded.
We must become better salespeople. We must inspire our prospects and clients to take action by asking powerful questions designed to discuss challenges and create some desire to find amazing solutions.
GREAT SALESPEOPLE WHO ALWAYS PUT THEIR PROSPECTS AND CLIENTS INTERESTS AHEAD OF THEIR OWN WILL ALWAYS FIND SUCCESS.
Make a determination to do everything you can to comply with these new requirements immediately. Make them part of your sales process. Use the new regulations to inspire more Americans to achieve the retirement success they are hoping for. Don't waste one second on any negative thoughts about the regulation. Don't worry about commission disclosure. Americans don't care how much you make if it's fair and they achieve their retirement success. Even have some fun. I have been telling people for years how much commission I make and I always tease that it's not enough with all the great service and benefits I provide. They never believe they are being treated unreasonably. Don't make a big deal about it. Disclose what's required or even more than what's required and then move to helping your prospects and clients achieve financial success.
With the proper attitude the fiduciary rule could easily become a blessing to those who embrace it quickly.
With the proper attitude the fiduciary rule could easily become a blessing to those who embrace it quickly.
Remember, you have always essentially been fiduciaries. Now, the only difference is you have to prove it.
Even with this regulation I believe the next 10 years will be the finest of your careers. This is a wonderful time to be an insurance and financial professional.
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We're passing on two of the newsletter's monthly sales ideas - every issue of the newsletter contains 7 ideas, plus one idea for the Canadian market. Subscribe to get them all.
Idea #1: Can We Afford to Live to 100
Last month I shared a couple of articles from the World Economic Forum that disclosed that eight major world economies had an unfunded pension liability of over $428 trillion dollars by the year 2050.
The United States and China accounted for more than $250 trillion of that total.
There are several things I don't believe I did a good enough job of explaining in last month's #2 idea.
First, this is only 30 years away. That is not a long time. That is barely enough time to prepare for the eventuality that these governments will not be able to keep their retirement promises.
Second, this will only get worse as more and more people retire and their longevity increases, the required funding will need to increase. In a world where discretionary dollars are at a premium, additional funding is not likely. If they don't get the funding they will have to increase returns. Most analysts are predicting lower long term returns in the stock market coupled with low interest rates for the foreseeable future. So increased returns look unlikely.
That leaves a reduction or a complete loss of benefits. Mathematically this is a certainty.
Let me explain: The unfunded pension liability according to this report I would like you to access is over $428 trillion. The Gross Domestic product for the entire planet is $75 trillion. That is the measurement of the total output of goods and services of the entire planet. We would need to use all of that output for almost six full years just to meet that unfunded requirement. That would leave deficits in everything else. Everyone would be dead because they used the worlds' GDP to offset unfunded pension liabilities instead of eating.
Again, please use this information with every grandma and grandpa in America. Use this to leverage their money. This information gives everyone a great reason to take action.
Title: We'll Live to 100 – How Can We Afford It?
www.weforum.org (World Economic Forum, May 2017)
https://www.weforum.org/whitepapers/we-ll-live-to-100-how-can-we-afford-it/
Idea #7: Low Inflation, or Is It Higher than We Realize?
Do you know that Social Security's purchasing power has reduced by 30 percent since the year 2000? The Cost of Living Adjustment (COLA) is being manipulated to reduce or eliminate inflation protection.
This article shows that since the year 2000, many of the things people use Social Security money on have increased in cost by 100 percent or more.
Medicare Part B and prescription drugs have increased by more than 180 percent in seventeen years.
Homeowners insurance and real estate taxes have increased around 150 percent.
Heating oil, Medicare supplement insurance, out of pocket medical expenses and oranges have all increased over 100 percent or more.
The Social Security COLA has not increased anywhere near that amount.
Doesn't that mean that people on Social Security have a lower standard of living? Ask them if they are okay with that or would be okay with that if they are not already retired.
This would create another great conversation that you can use to inspire your prospects and clients to take action.
Title: Seniors Since 2000
www.fool.com (The Motley Fool, June 26, 2017)
https://www.fool.com/retirement/2017/06/26/the-10-fastest-growing-costs-for-seniors-since-200.aspx
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