PowerTalks Podcast

Jamie Hopkins -- Rewirement: the Path to a Thriving Income Planning Practice

Welcome to PowerTalks, the podcast for growth-minded advisors. Today, Jack Martin, our strategic marketing consultant and founder of the Elite Advisor Group, talks with Jamie Hopkins about “Rewirement: the Path to a Thriving Income Planning Practice.” Ninety percent of pre-retirees are “clueless” about how to handle decumulation. In this episode, we’re talking about how to address those needs and build a widely successful business doing it. Jamie is an attorney, ChFC and CLU. He is currently the Director of Retirement Research for the Carson Group. He recently joined Creighton University as Professor of Practice in the Heider School of Business. Previously he was in charge of curriculum for the Retirement Income Certified Professional designation at the American College and co-director at the NY Life Center for Retirement Research. To help you start the retirement income planning process with your clients, we’ve prepared a brand new guide to deeper client conversations. It’s called “Longevity: Blessing or Curse” and it is available to download right now. You’ll find the download button right on this podcast page. It just takes a minute to get your copy. Our Advisor Development Consultants are standing by to help you turn ideas into action. Just give us a call at 800.752.0207 Stay connected with future episodes by subscribing today and keep posted on all our offerings by following InsurMark on LinkedIn.

"Coach Joe Lukacs" -- How to Finish 2018 With a Bang

Host Jack Martin, strategic marketing consultant and founder of the Elite Advisor Group talks with “Coach” Joe Lukacs about how advisors can finish 2018 with a bang, and set the table for an even bigger 2019. Coach Joe is the founder and CEO of the Magellan network. For the last 25 years he’s helped the industry’s leading advisors realize more success. SUZANNE:           00:03     Welcome to our PowerTalks podcast. Where leading advisors find the field to drive their business alpha. For those of you who may be joining us for the first time, InsurMark is an advisor development organization. This is the next step in our 35 year history of aligning the independent financial advisor with best of breed resources and services. From a dedicated professional team, product partners, technology vendors, practice management leaders and business development systems. Today Jack Martin, our strategic marketing consultant and founder of the Elite Advisor Group will be talking with coach Joe Lukacs about how advisors can finish 2018 with a bang. And set the table for a bigger 2019. SUZANNE:           00:50     Coach Joe is the founder and CEO of the Magellan network. For the last 25 years he's helped the industries leading advisors realize more success business. Now, let's join Jack and Coach Joe. JACK:     01:05     Thanks for joining us, today. This has been a pretty interesting year for advisors, what with all the volatility, regulatory and technology changes that we've seen. It certainly made it challenging for a lot of advisors to find more client time, more family time and to achieve that work life balance. Today, we're talking with performance coach extraordinaire, Joe Lukacs about how to finish 2018 with a bang. I'm curious. How did the moniker Coach Joe get started? COACH JOE:        01:37     It just came about quite frankly, Jack, after 25 years. It was just simple to say Coach Joe versus Joe Lukacs with the funky spelling that I have. Instead of having everybody butcher my last name, we just kinda eliminated it a little bit and we like to keep things simple, here. JACK:     01:53     Gotcha. In spite of all this volatility and all these changes, many advisors are having a great, let's say even record year. Joe, how are you and your advisor clients approaching your end? COACH JOE:        02:08     Jack, that's a great question and I think it depends on where we're at. For your comment, I think advisor in one to three conditions. They're having a record blow-out, excellent year. They're having an okay year and they're not having a good year. Think about the three different types. What I've always found very fascinating, when somebody has, let's just say record year, if you talk to them, one of the biggest fears is how do I do it again, next year? Or how do I surpass it? In essence it becomes a bit of a stresser. COACH JOE:        02:41     The second scenario, when you're having an okay year, could have been better, you get a passing grade. You're not gonna get an A. Question then comes, "What do I need to do better?" "What do I need to do different?" Then the third scenario is, it just didn't work out. For whatever reason. Maybe there were some personal challenges that distracted you, whatever it is. We were in survival mode the entire year. That's where you have to look and say, "What has to be different? What different dynamics do I need to bring in?" COACH JOE:        03:12     I think, a little bit, it depends on where you're coming from as you exit out of 2018. Kind of pivoting towards 2019. I think of all scenarios, like the advisors having an excellent year, you've gotta keep your foot on the gas. And here's why. The reason why you're having an excellent year is cause you're executing things. You're behaving a certain way. You're focused on certain things. Sometimes there's a tendency to start sandbagging a little bit going into November, December and that normally allows our habits and the structure that we put in place, that got us our excellence to wither. We wanna keep things going as long as we can; keep moving forward. COACH JOE:        03:53     If you're kinda in that middle box, where it's been okay, you wanna start ... whatever changes that you think you need to make, you don't wanna wait till January 1st and say, "Okay, new year. Let's go ahead and let's make these massive changes come January 1st." Because the reality is that your 2019 needs to start, now. It's a dual mandate. Finish 2018 but look at where you have your gaps and then what you wanna do there is start working on them, now. November, December, so everything is grooved come January 1st. Then, if you're in the third scenario, I think it's really a time to be reflective and say, "Okay, is the reason why I had a poor 2018 internal, external or a blend?" What I mean by that is external. Maybe there's something. Maybe a family member, a relative was sick or something. There was a distraction and some adversity, if you will, that was external. COACH JOE:        04:48     Or, was it totally self sabotage. You just kind of you dig out of the blocks really well. We'll talk about that in a little bit. You defaulted back in survival mode and for some advisors, Jack, this is their entire career, is like 20, 25 years of start up. Every year it's a new year. Every year it's gonna be different. It really doesn't do that. It really doesn't become that. I think it really depends on where you're at, but in any of these three scenarios, the one common theme is gonna be this. 2019 starts today. The prep for it, the habit building. The formation of the systems need to start now so you enter the New Year the way that you need to. JACK:     05:32     With your advisor clients, do you typically have a checklist of things that you want them focused on at year end? Is there a set of tasks or strategies that you're keeping in front of your folks? COACH JOE:        05:50     Yeah, there is Jack. Actually I called the year end punch list. So, some of the elements on that, would be, "Hey, where are we with our CE credits? Are we good to go on that? Are we gonna get any surprises come January? We wanna have a good look at that. On the client side, obviously RMD's, tax loss harvesting, if that's appropriate. We wanna make sure that's happening. From a team perspective, we wanna schedule a team offsite towards a latter part of the fourth quarter, maybe kind of as we wrap up December, to bring the whole team together, do an offsite, go over the year, make sure everybody's on the same page. What needs to be better, different, enhanced for 2019, we wanna be doing that. COACH JOE:        06:33     In addition, what are we doing for the clients for the holiday, if anything? Are we doing Thanksgiving cards, holiday cards, open house, gifts, that needs to be decided if it has not already been decided. Then, quite frankly what I love, is planning for a 2019 event. In early January, welcome to 2019 event. We started testing these about four years ago with clients. A huge success. I really like the idea of all my clients in the second week of January hosting some type of educational type event, kind of gets us off to a great start in the year. COACH JOE:        07:11     Those are some of the deliverables in that punch list. Probably the most important thing is how you gonna handle business planning? Again, if you had a great year this year, what's the plan to be even better next year? If you had an okay year, what's the plan to have a breakthrough to the next level? If it was not a good year, what's the plan to be different? You have to change things. COACH JOE:        07:33     Those are some things we look at and I start talking to my clients about this actually, early October. That way, we're all on the same page and we leave nothing to chance. JACK:     07:45     We've learned in the last few years how important the psychology is to business success. So, mindset has a big role to play in how we position ourselves and how we execute. And how we ultimately succeed or not. With your folks, what are the things that you're talking to them about with respect to mindset? COACH JOE:        08:09     Jack, great question. The first thing we have to tackle is how do you even define mindset? Because that's a big word. It can mean so many different things to so many different people. The first thing and this is relatively new work that I've done for the last 18 months or so, is I've taken mindset and actually broken it down to components. What I do with my client, we work on each component. These are in no particular order. I call it the four plus one. The first thing we'll look at is what is the advisor's beliefs? Beliefs around success? Beliefs around failure? Believes about what they think they deserve? COACH JOE:        08:45     Those are just some of the examples. Because if you're an advisor or any human being and your whole belief set is, "I just wanna make enough money to survive," well, that will become a self-fulfilling prophecy. If you have a belief that it's hard to get new clients, it will become a self-fulfilling prophecy. Or, "I'm not good at workshops." "I'm not good at this," you have this internal ... you have this belief set going on so we wanna examine what it looks like. The second thing we're gonna look at is what's important to you, your values. For example, if I'm an advisor and looked a lot of advisors in our space, if you asked them what's important to them, they're gonna talk about things like success and freedom and all those things. COACH JOE:        09:27     Think of it this way, if I'm very freedom oriented and every time I take on a new client, I feel like I have less freedom cause I don't have the right business model, the advisor will self sabotage bringing on new clients because yes thing with the economics. But on the other side, it's like every new household there's another set of reviews, touch base calls, things like that. We get busier and busier. We need to diagnose those. Those are two things. COACH JOE:        09:54     Then the third one is our internal dialogue. Our self talk. What's our habitual conversations with ourselves? When we get up first thing in the morning, when we're getting ready to sit with a prospect, when we're getting ready to sit with a review, or how about when a client's on the phone? "Hey, client needs to talk to you." You fear or you look forward to the conversation? Internal dialogue. COACH JOE:        10:16     The fourth one is the man or woman in the mirror. What do you see in the mirror? Do you see a successful person? Do you see a person who deserves it? Or do you see an imposter. Like, "Oh, boy, I'm just lucky." If you walk around thinking you're lucky, then you're giving yourself no credit for your success. Those are the four and then the plus one is how do you define failure to yourself? Because you cannot be failure adverse in this industry and be highly successful. This industry is built on failure. If you have a disempowering definition, ie. "Well, I fail when I don't achieve my goals." "I fail when I don't get my result." Then, you are gonna be adverse to going for it. Cause if you think failure's a bad thing, consciously you'll try to avoid it by sabotaging yourself. That's mindset, Jack, before plus one, so what we do is we actually map the current mindset of the advisor and then we take them through a process. COACH JOE:        11:15     This is, by the way, this is our business planning. Then what we do is we have them consciously, consciously remap it in a way that's gonna serve them. Because how do we get the old one? We just sit there when we were 15, or seven or eight years old. Or 25 and say, "Gee, I wonder what I believe? I wonder how I do define success or failure? I wonder what my values are?" Nobody's that conscious, typically. That's the first part of our business planning process is, "Hey, success is 80 percent mindset. 20 percent mechanics." This industry focus a lot on mechanics. And what holds advisors back is the mindset. JACK:     11:53     So many high performing athletes and executives have a psychologist just coach working with them. Do you find that in the advisor community that folks are embracing that concept as well? COACH JOE:        12:12     I believe the advisors who are forward thinking and understand and have the belief around that that's important. Then, yes. But here's the real challenge of our industry. There's a lot of ego and there's a lot of arrogance. So, ego. "I'm good. I know what I'm doing. I don't need any help. I'm just fine." But meanwhile, hey, you've been flat lined for 10 years in your business. So, maybe something's not right. Then we get the arrogance in the way. I don't need any help or anything like that, so ... It really boils down to the advisor understanding ie. "the human being," that at the end of the day, they are the core product. They are the initial product. COACH JOE:        12:53     If somebody's gonna hire you as their advisor and do business with you, is because they like you, they trust you, they have confidence you're gonna do a good job for them. That's where the work is. I don't care what seminar process you have and what your website looks like and your office space, if you get up in the morning and you're sitting fear and feeling like you're a fraud ... And feeling like you're just lucky, you're gonna do okay in this business, that's the dynamic of our industry. But you will never achieve the greatness that you believe you deserve because you're not willing to have help. To have assistance. To have that third party tweak you in a way that unlocks all your potential. JACK:     13:37     Great advice. Great advice. One of the things that we've learned in the last few years is how important planning is. 70 percent of elite advisors have a formal business and marketing plan. And we've learned that advisors with a plan actually pull in 47 percent more revenue each year. What tips can you share with us about planning in this fourth quarter and goal setting for next year? COACH JOE:        14:03     Great. All great questions. I love the data. Number one is if you're serious about your business and you're serious about success, you need a formal business planning process. Marketing planning process. I don't mean on January 1st, or December 31st you break out the old spread sheet, plug some numbers in there, whether it's assets or premium or something like that. You come up with a very simple one pager that took you an hour to put together. That is not a well thought out process. So, I think the first thing is commit to having a plan and then commit to really reviewing the plan. My belief and the way I set up my planning process is it's a living document. The hardest, and I tell everybody this every year. The hardest thing to do is to do the first one. COACH JOE:        14:49     Once the first one's done, it's really about edits and tweaks. Not an entire rewrite. So many [inaudible 00:14:55] kind of repeat the same thing over and over and over again. They don't bring any new dynamic in. JACK:     15:03     Is there a specific format that you suggest? Is there a process that you coach with your clients? COACH JOE:        15:12     Great question. Here's my process and it's gonna sound pretty laborious for some people and I appreciate that, but it's highly, highly, highly effective. Before we do the plan, we gotta look back and say, "Hey, where are we, today?" What we do, is we walk 'em through a three-part bench marking process. We want a narrative on the year. We want some KPI's which are key performance indicators. Kind of taking the pulse on the health of the business, the success of the business. And then we have 18 benchmarks that I have found to be extremely important in advisor success. Before we kinda move forward, we need to take inventory on where we are today for two reasons. COACH JOE:        15:51     Number one, we wanna see where our gaps are from systems and behaviors, on how we approach things because we wanna improve them. But secondly and Jack you know this as well as I do, the common theme a lot of time with people is, "Hey, we do something. It works and we stop doing it." The other side of this is, we wanna memorialize those things that we do well, so we put them into the plan. The first thing we're gonna do is we're gonna do a bench marking process and then I take 'em through a nine step planning process. We do two segments on mindset. Like I said earlier, we're gonna benchmark kind of where you are today, between the ears. Then, the really simple way to explain this is, if you wanted to double, triple, quadruple, 10 extra business, what type of human being do you need to be able to pull that off? COACH JOE:        16:39     Because at the end of the day, it's the person first, the business second. You gotta evolve as a human being, then your business will grow. We're gonna do that. Then we're gonna take them through a goal setting workshop. Then, what we're gonna do, we're gonna have them create their ideal lifestyle business. We're gonna really create to get integration. Not balance. I think work life balance is dead. I think it's all about how to integrate the two, so we do planning it that way. We integrate. Once we're done with that, then what we're gonna do is we're gonna do a five year strategic plan, where you need to be personally and professionally in the next five years, which I guess is 2023 or 2024. COACH JOE:        17:16     After that, what do we wanna do in 2019? Five to seven business, personal goals and then not just a goal, but why? Then, what is the map or the massive action plan to pull that off? Once we're done with that, we jump into the marketing business development segment where we're gonna talk about your brand, your website, your thought process, your optimization process, your seminar process, your communication process ... we're gonna lay all that out. After that's done, now we're gonna break all this down into a two-page, 90 day plan. After you do our [big 00:17:49] strategic plan, now you're gonna work throughout the year with four, two-page mini-plans, which then devolve into a daily game plan, morning ritual, things like that. COACH JOE:        17:59     It's really from, "Hey, five years from now, all the way to, what do we need to do today, to make things happen?" In my experiences, I've been doing planning now for 20 years with my clients. That has been the proper way to do planning. JACK:     18:18     That doesn't sound like the kind of process you'd want as a do-it-yourself sort of project. Right? COACH JOE:        18:25     Good, better, best. Best would be, you come join me once a year, when I hold my annual planning conference, which I have done now since 2001. It can be do-it-yourself. The question is, what's gonna work? There's two philosophies that I've seen success. Number one is you grab a couple days. You chunk it out and you go somewhere, whether hotel or some place outside your office; you're not distracted. You just knock it out. And I've created all the video instruction to go do that. The second way is you do it incrementally. You say, "Hey, look, everyday, I'm gonna take a couple hours in the morning and I'm gonna knock a module out and I'll knock all nine models out in two weeks. It's funny, when I put this all online years ago, with the first version of this, I held a planning event in Orlando, as I typically do. COACH JOE:        19:20     I made the comment, "Hey, this is the last one we're ever gonna have to do, because it's all online now." Nobody has to get on an airplane. Nobody has to travel. And the fascinating thing about that, Jack, I had a near mutiny. Cause advisors told me that if they didn't have a place to go to, to force them to do the plan, it probably wouldn't get done. Even after 10 years of having this thing online, now, I still, every year invite people to come. We try to go nice places. Like, on the beach in Ft. Lauderdale this year. We spend really three days. It's a three day process to knock this out. JACK:     19:57     Can folk still do the digital? Can they still do the live coaching with you or is it too late for that? COACH JOE:        20:04     The live event's sold out. We tend to sell out ... we can't have thousands. For it to work properly, I have to cap it so that it's effective. I want people to feel good around that. That is sold out. But we are gonna be rolling out the latest version live over the next several weeks and I would love every advisor in North America to have access to it quite frankly. SUZANNE:           20:26     How prepared are you? Coach Joe is doing a great job of teaching us the important steps we should take this year and next. We'll get right back to the podcast in just a second. But, how prepared are you that integrate insights into building a more successful and sustainable business? At InsurMark we have a proprietary value engineering process that helps growth minded advisors get more out of their life's work. Advisors engaged with us in this process are realizing more client time. More family time and more value from their business. That's what we call driving business alpha. What is business alpha? Why is it essential for each advisor? SUZANNE:           21:10     How does value engineering work? We have a new e-brochure called "Driving Business Alpha." We made it super easy to get your copy. Simply click on the download business alpha tile next to the podcast play button and tell us where to send it. Okay, now let's get back to Coach Joe. JACK:     21:29     This time of year, a lot of advisors are in full go mode. They have pretty full schedules in terms of seminars and workshops and client reviews and all that kind of stuff. What can they do to get more out of all of that activity this year and next? COACH JOE:        21:50     Jack, it's interesting. One of the things I find a lot of times, especially with advisors that are primarily driven by doing seminars and public events and things like that. Is there's sometimes this mentality of, well, if they don't say yes to me, immediately. Or they don't book an appointment, we're just gonna throw them ... we're gonna throw that lead or that prospect in the trash, keeping move forward. I think that's a huge mistake. You wanna have a very well though out drip process, follow up process. I think we have to remember as an industry, if we have a nice couple coming and they have a half of a million dollars to their name and they can't make a mistake. Just think about that from a rational standpoint. Well, I'm gonna see this person, I'm gonna have a couple of meetings and then I'm gonna hand you over all my money. Now, it does happen, but for every person that gets that kind of, "yes," in that process, there's probably another opportunity that they missed, because the person needs to think about it. They're fearful. The timing's not right, whatever it is. What I have found is if you can put a robust follow up plan to give on the back end of that, where we're inviting them to client education events, to hybrid events, things like that. We're paying them maybe once a quarter, checking in with them, seeing what's going on. COACH JOE:        23:08     That you can literally double the yield out of a similar cycle by having effect to follow. And I think a lot of advisors just don't think in that terms, they're just on to the next workshop. There's nothing wrong with that, but my goodness. You know how much money we're leaving on the table, successfully leaving on the table? Without having that follow up. That's one I think is really important. Then the second one is really that they're so busy working in the business, they're not working enough on their business. Which almost sounds counter-intuitive. But what I have found is that more time and advisory can spend thinking about mindsets, thinking about systems, thinking about processing, thinking about their business, the faster they actually grow their business because they're looking down the road and seeing what's coming. And allocating time for that. JACK:     23:56     For the advisors who are pretty busy right now and maybe can't take the time to integrate and implement a drip system, what should they be doing on the fly? Is there anything they can do to get more out of this year and get ready for next? COACH JOE:        24:16     The simple thing to do, especially with all the market volatility is I'd be reaching out to all my prospects. All the people who came to the workshop or that are in my tribe, right? So try being those people who are not clients yet, but they're coming up on our newsletter list or mailing list, whatever it is. I'd wanna reach out to them and extend an offer to a 20 or 30 minute phone call. Just with the advisor to check in. Maybe just have a conversation. Especially, if they haven't heard from their current advisor and they're hearing from us. COACH JOE:        24:46     We like that. We like to create that, that gap, if you will. I think that's really important to do. I think that's something we want to take a good look at doing. Then secondly, quite frankly, and it's more of a strategic thing, figure out when the year's over for you. One of the things I ask my clients to do is, "Hey, when does 2018 wrap up?" And I don't wanna hear December 31st. Is it gonna be December 14th, December 15th? When do we call it a year because then I want two things to happen. I want down time, slash renewal time and I want strategic time to work on a plan. COACH JOE:        25:22     The other thing, which is more into 2019, a lot of advisors had this concept, "Oh my gosh, it's January 1st, we gotta get after it." They really thought that the holidays would be restful and there'd be downtime and stuff like that. In most cases, with family commitments and parties and events and just the holidays in general, I think a lot of times advisors come into the New Year a little burnt out because they never really had an off season. So, what we've been doing the last couple of years, we've been delaying the start of the New Year to literally that second week of January and we take that entire first week, to wrap up our planning, to rest, recover, get out mind right and then get ready to roll January 7th, January 8th, January 9th. COACH JOE:        26:08     Whenever that next week is. I found that to be preferable and superior to just rolling out of one year and then rolling right into the next year. JACK:     26:20     Over your 20 years of experience, I'm sure you've heard a lot of horror stories from advisors about mistakes they make this time of year and wrapping up and getting ready for next year. So, can you share some of those things not to do in the next couple of months and to get your 2019 rolling? COACH JOE:        26:40     I think the first thing is, look, we all know the holidays are coming, but it doesn't mean that everything stops. I hear it all the time. Well, you can't get people to do anything come mid-November. Or you can't do a workshop ... once November comes you can't do workshops or whatever. I found that to be inaccurate. In fact, I go the other way. I love when my clients do workshops in early December. Why? Because all their competitors stop doing them. COACH JOE:        27:04     Cause they bought into the conventional thinking around things. I think the first thing is push until hypothetically December 14th, which I think is a Friday. You push until that day. And you run your model, you make your touch base call, you look to schedule clients, things like that. If it's important for somebody to do something, they'll make time to do it. Don't make decisions for people. I think a lot of advisors, like I said, go into this holiday concept and in essence you're making decisions for your clients on prospects; on whether you think it's important to them or not. Don't do that. I'm not asking anybody to sit here and run a marathon and work hard. COACH JOE:        27:43     I'm asking you to send an email, leave a voicemail. We're not talking a lot, here. You can do it from your heated or air conditioned office. You're not gonna sweat. It's pretty easy if you focus on it. I want them out there pushing till the very, very end. What's the worst case scenario? Somebody's gonna say, "Yeah, I know we need to get together, but the holidays are here. Can we do it in early January?" If that's the worst case scenario, all you're gonna do is fill up your with meaningful meetings and that is very important because one of the things, Jack, I always found ... Advisors will do planning and they'll get all excited for the new year and then they'll set these really crazy goals for the first quarter. COACH JOE:        28:23     Especially in January. They get all excited for the new year. They're gonna write all this business and all this jazz and they forgot one thing. They have no momentum. They sucked that pipeline dry to make up the year and so what happens in January? Not much. February 15th, we've got a little business in. The psychology for most human beings is that they set goals and if they don't feel like throwing track for them, come mid to late February ... Most human beings will abandon the process. So, we wanna guard against that. To me, your first quarter 2019 momentum really does get created in November and December. COACH JOE:        29:02     You don't create something in January happen. My belief has always been that it's 90 days from the start of a process to money in your bank account. 90 days. Prospect meetings, a couple of meetings, we have to do analysis, put a proposal together. Get the business written. Get the business placed. Get it paid. I always think in terms of 90 days. If you don't wanna give away the first quarter of 2019, you guys are setting the stage for that now in the latter part of the 4th quarter of 2018. JACK:     29:34     Joe, you're one of the most experienced coaches in our business. What's changing in the coaching world that advisors should know about? COACH JOE:        29:42     Wow, that's a question I don't think anybody ever asked me before. I think there's a differential in the type of work I do and a lot of the other big firms. And I'm not a big firm by any stretch of the imagination. I think a lot of coaches coach around practice management. They wanna coach around systems. I know for a fact that I'm the only coach that has anything that resembles a well thought out business planning process. The reason I know that is, cause I see all the other coaches work from my clients as it comes in. I think to me, coaching is about ... there's two ways you can be a coach. COACH JOE:        30:17     Processes and personnel. If you say, "Well, I just need ... I've got my head on straight. I'm really cool. I need this. I need a process." There are plenty coaches that will do the practice management gig and that's fine. But I've always found that to be the smallest percentage of people that need the help. If you have all the processes and you have the systems and you had seminars. You have everything ... Why am I not more successful? You do not have a system process challenge. You have a mindset challenge. You have a vision issue. What's the vision? COACH JOE:        30:50     My process, I'm all personality driven. You drink my Kool-Aid or you don't. I'm cool with that. Look, I am not for everybody. I think what you need to do is whatever coach you're gonna use and look, every advisor needs a coach. I'm not saying it should be me. Find somebody that you resonate with. "I like that person's approach. I like their style. I kinda like the way they handle things." Then, that's the person you wanna go ahead and seek out. COACH JOE:        31:15     I think the last thing, quite frankly, Jack, is you wanna be very mindful. There's a lot of these big coaching companies out there and they're usually led by somebody very dynamic, very charismatic, things like that. I'm gonna go work with that coach. But the reality is, you're not gonna work with that human being. You're gonna work with one of their sub coaches or underlings, whatever. That can be a whole different experience. I think that's the differential, now. When I started to coach, 25 years ago in this industry, there was no such thing as a coach. COACH JOE:        31:47     I literally had to go and explain what I was going to do without much of a title. Now, in the last 10 years, ever since '08, '09, quite frankly, there's a plethora of coaching opportunities. I think any advisor, what you need to do is do your due diligence. Make sure it's something that makes sense to you. And that you resonate with the person and the other thing I guess is, if they gotta really push hard on the hard sell to get you to sign up ... why is that? You should be naturally attracted to ... it should be, "I want that," not "I have to be sold that." I don't think you can sell coaching. I think it's a natural evolution of value creation and either the person's gonna opt into what you're doing, but they shouldn't have to be sold on how you're doing it. JACK:     32:34     Fantastic. Joe, thank you very much for these insights. I think our advisors are gonna appreciate knowing what they can do right now, in the fourth quarter of 2018, to make a difference. Not only in 2018, 2019. So, thank you very much for joining us, today. COACH JOE:        32:51     Jack, thank you for having me. SUZANNE:           32:53     Well, that was a powerful and timely conversation. We know Coach Joe offered many great tactics and strategies that you'll wanna integrate into your business. To help you do that, our advisor development consultants are standing by to help you turn your ideas into action. Just give us a call at 800-752-0207. And ask how we can help you finish 2018 with a bang and set the table for a bigger 2019. Stay connected with future episodes by subscribing today. And keep posted on all our offerings by following InsurMark on LinkedIn.

Dr. Roger Ibbotson - Why Advisors Should Consider FIA's as a Bond Alternative

In the inaugural episode of the PowerTalks Podcast, host Jack Martin, strategic marketing consultant and founder of Elite Advisor Group, talks with Dr. Roger Ibbotson about his latest research and why financial advisors should consider Fixed Index Annuities as a bond alternative. Dr. Ibbotson is an economist and creator of the iconic "Stock, Bonds, Bills, and Inflation" chart. He is Professor Emeritus of Finance at the Yale School of Management. He is a Member and the Chairman of Zebra Capital Management, LLC. We are also joined by John Holmgren who is the President of Zebra Capital Management. [http://survey.insurmark.net.pages.services/ps-version-ibb-podcast-wp-download/?utm=podcastibbotsonls] FULL TRANSCRIPT Suzanne Lynn:    00:01     Welcome to our PowerTalks Podcast, where leading advisors find the fuel to drive their Business Alpha. InsurMark is an advisor development organization. This is the next step in our 35 year history of aligning the independent financial advisor with best of breed resources and services, from a dedicated professional team, product partners, technology vendors, practice management leaders, and business development systems. 00:31     Today, Jack Martin, our Strategic Management Consultant and Founder of Elite Advisor Group will be talking with Dr. Roger Ibbotson about his latest research, and why financial advisors should consider the fixed index annuity, a bond alternative. Dr. Ibbotson is an economist, and a creator of the iconic Stock, Bonds, Bills, and Inflation chart. He is Professor Emeritus of Finance at the Yale School of Management. He is a member and the Chairman of Zebra Capital Management, LLC. 01:05     We are also joined by John Holmgren, who is the President of Zebra Capital Management. And now, let's join Jack and Dr. Ibbotson. Jack Martin:        01:14     Hello, Dr. Ibbotson. Hey, thanks for joining us on the Jay Talks Podcast today. It looks like Yale might win the Ivy League in football again. Roger Ibbotson: 01:23     Well, I'm certainly hoping so, but I'm not gonna be an expert on that although I have attended a game already, so. Jack Martin:        01:30     Yeah, so today what we wanna talk about is your white paper. We wanna talk about Fixed Annuities and Bond Alternatives. You started your career as a Bond Manager at the University of Chicago, right? Roger Ibbotson: 01:45     Yes, I actually managed the bond portfolio at the University of Chicago, and it was a very interesting time. It was a time when bond deals were still rising, but they were about ready to hit their peaks in the early 1980s. And they got into the double digits, so it was an interesting time but not exactly like today, because today's yields are much lower of course. Although we may have the rising yields. Jack Martin:        02:10     Right. So what's your thinking about where interest rates and the bond market are today? Roger Ibbotson: 02:16     Well, you know I think they are really low actually, because bonds have actually, yielding around three percent today. And this is after a long drop in yields from the early '80s when they were double digits, falling all the way to three percent, so it's been a time when people historically have really yielded great returns on bonds. Because during that period of drop, they actually had a high yield, plus they actually got a capital gain from the drop in yields, but the way a bond works is, you get the yield and then when the yield drops, you're practically, you're holding the higher yielding bonds and your bonds go up in price. So, people for decades have really realized not only that yield, but substantial capital gains in bonds. Jack Martin:        03:09     In the title of your white paper, you use the term bond alternatives. So, help our audience understand what that means and why we need to be thinking about those today. Roger Ibbotson: 03:17     Well, you can see why we might need the bond alternative when you think of today's yields now, because now they are at that three percent, where are they gonna go from here? They're much more likely to go up than down. And if they go up, you end up with a yield plus a capital loss. And so you financially have negative returns on your bonds. So, we need an alternative actually, and that's why we looked at this whole situation because we need to look at some other way of actually taking less risk, at the same time getting a decent return. So we need another way to do this, which we don't wanna have capital losses in our bonds, which we might very well have. We need an alternative. Jack Martin:        04:02     Do you think investment advisors and investors generally maybe have a little bit of a blind spot about those bond risks? Roger Ibbotson: 04:09     Well, they do because they've been so used to actually getting positive big returns on their bonds. So, they've viewed bonds as a really a substantial source of returns. But that's not what's gonna happen going forward. Even the three percent is probably a high estimate of what you'll get going forward, because as bond yields rise, you're gonna have capital losses. So, yes they do have a blind spot, and for good reason. They're looking at history, and certainly bonds have served everybody very well, historically. It's just that today, times are a little bit different, and that today at that low yield, you're not gonna get those high returns anymore, and you may even have capital losses. Jack Martin:        04:53     So, is there something in the way that we're wired or is there something behavioral, you know behind why people are still so in love with bonds, based on what you just said? Roger Ibbotson: 05:05     Well, people tend to extrapolate of course. Whatever happened to them last year or last decade, they expect that to happen again. But what actually, you know bonds have a structure to them. You know that's not gonna happen again. We actually know what the yield is today. So when you actually know what that yield is, you know that the only way you're gonna get a capital gain is if the yields fall further. There's not too much further they could actually fall. But they could rise definitely. So behaviorally, people tend to look back at the past and think that's the future. But obviously that's not the case in the bond market. Jack Martin:        05:42     When you were at Ibbotson back in 2007, you wrote a monograph titled, Lifetime Financial Advice, and in that you discussed investing over one's life cycle. So, should investors be concerned about longevity risks with that in mind? Roger Ibbotson: 05:59     Well, they certainly should, and actually you know when you think of the whole life cycle that somebody invests in, actually the insurance can kind of play a role in every piece of it. In the early years, people have steady wage income typically, and they could take on a lot of equity risk. But the other thing they often need is life insurance. So, life insurance pays a role. Roger Ibbotson: 06:21     Now, as you start approaching retirement, you actually have to take less risk and here again, insurance can play a role, and here now we're looking at accumulation annuities, such as FIAs can play a role in accumulating your capital in a less risky way. And then when you get into retirement, annuities can also play a role, because here the retirement people need continual income streams. They can have payouts. They don't know how long they're gonna live though, because that's part of the ... that's what longevity risk is all about. Of course, we want to live for a long time, but if we do there's some chance we would run out of money, and actually the pay out annuities actually help to solve that problem because they pull everybody together, so that each one of us can actually get an income stream for the rest of our lives. Jack Martin:        07:14     So, just to follow up on that, conventional wisdom says that as we approach retirement, we wanna invest a little bit more conservatively. So, what makes those years right before retirement so critical? Roger Ibbotson: 07:26     Well, those years are, we've been saving up for retirement and actually, those are the years to actually have your sort of your maximum financial wealth because as you start into retirement, you start withdrawing from that, and paying for your retirement. Now, if you have a loss when you have the biggest amount of money at stake, that loss actually can ruin your retirement really. So, they're really important years. And that's why we're recommending in general, and I've always recommended, that as you start approaching retirement, you need to de-risk. You need to take less risk in that portfolio, and of course the conventional way that's been done is with bonds. But I guess now, now we have other instruments like Fixed Index annuities. Jack Martin:        08:14     And so, there's been a lot of conversation about those first few years after retirement, and the risks associated with that sequence of returns and those kinds of things. So, are the risks different? Should we have a different perspective on those first few years after retirement? Should we invest a little differently? Roger Ibbotson: 08:33     Well they are especially critical because we no longer have the wage income, and we are actually typically making these withdrawals. So, the combination of having that relatively large financial stake and withdrawals taking place, and then superimposing it on a return, if you have a bad return here, it's actually gonna take a large chunk out of your financial wealth. If you have a bad return much later, it doesn't matter as much because you won't have as much financial capital anyway at that point. Jack Martin:        09:08     We've been throwing around this term, fixed indexed annuities. What is a fixed indexed annuity? Roger Ibbotson: 09:15     Well, first of all it's based on an index and actually, it's based on ... and it's an insurance contract that is participating in an index. So, in our case, we'll talk about that later, but in our case it's actually an equity based index. So, if you participate in an index, like in a fixed index annuity, you're getting the upside of that index. Now, because this is an insurance product, it's actually principal protected. So, as you get the principal protection on the one side that's insured by the insurance company, and you get the participation in the index which could be an equity index, and so you get the positive returns, or part of the positive returns of the equity market, at the same time you have no real downside risk. Jack Martin:        10:07     So, is that what you were talking about in your white paper when you said, "A major advantage of the FIA is the ability of the insurance provider to transform equity returns into a more tailored risk return profile?" Roger Ibbotson: 10:22     Yes. That's exactly it because actually if you think about what people really want here, they want to participate in the equity market certainly, but they're afraid to, and they're naturally afraid to. In particularly they're afraid to as they start approaching retirement. So how do they get that participation while the reason why they're afraid is because they know that stocks can drop, and here is where the insurance company plays such a big role with these fixed indexed annuities, which if you actually had some principal protection, you're not gonna have the losses. At the same time, you're gonna get equity exposure on the upside. So, this is actually a product, fixed indexed annuities that are designed specifically to meet the needs of the investor. And that's why actually we're calling it a tailored product, because it's actually tailored to meet the specific needs of the investor. Jack Martin:        11:23     So there are a lot of investment advisors we've heard, who have a little bit of a bias against annuities. I guess they think FIAs are maybe too complicated, maybe too expensive. Are they right? What are they missing? Roger Ibbotson: 11:41     Well they can be complicated, of course. And the reason why they're complicated is, because they're tailored. I mean, if you buy suits off the rack, you know they're not gonna be as complicated as a tailored suit that is actually designed to fit you real neat. And here, by tailoring it in this case, is principal protection and equity participation, that combination is by its very nature, somewhat complicated, and so any contract that actually gets you that is somewhat complicated. Roger Ibbotson: 12:14     But that's a necessary component of a FIA and it's there for a reason. Now, the other aspect of this is the potential costs, and people have said that annuities can have costs like FIAs. Well let me say that these are really for a long term contract, and the costs are high if you get in and then you get out, and you have surrender charges and so forth. But these contracts are designed for people who can hold them for the whole term, like eight, nine, twelve years, whatever they select. But the whole term. Once they're held for the whole term, the accrued costs each year are not that high. So, the key is that these are for the long term investor, and I think the key is matching them up. In fact, by having trusted advisors here match up the right kind of investor with the FIA. Because once you have the right kind of investor that has that long term perspective, it's actually meeting their needs and the costs are not that high. Jack Martin:        13:23     In your white paper, you talk about an uncapped fixed indexed annuity strategy. What does that mean, and what's the benefit of that approach? Roger Ibbotson: 13:36     Well, we get equity exposure in those fixed indexed annuities and some of them can be capped, and some of them are uncapped. Actually I think the uncapped has the advantage though of participating in equity markets, getting equity exposure during some very big years, and so there are years where you could have very high returns in a fixed indexed annuity, and if you chop that off, of course it's much harder to get a high return by owning a fixed indexed annuity. A lot of the benefit comes in some of these great years, and we don't wanna cap it I guess, because if we cap it, we're not gonna get that benefit. Jack Martin:        14:17     So, in your white paper, you did a lot of modeling of what different investments would look like, what their performance would look like under different scenarios. And I think it's in charts 11A through 11D where you talk about, you know what happens to a 60/40 portfolio, a 60/20/20 kind of portfolio, and if interest rates are rising, if there's market volatility. So, can you talk a little bit about that modeling that you did there, and how it impacts the way we look at assets and portfolios? Roger Ibbotson: 14:53     Yes, we wanted to consider a lot of different scenarios. Of course the stock market can go up or the stock market can go down. And of course, interest rates are looked at, particularly they could be flat and unchanged but they could also rise. So we tried to look at all the combinations of these, and see what would happen to different types of portfolios. And the kind of portfolios we looked at were, well first of all, how would a stock portfolio do and how would a bond portfolio do under these scenarios, but also how we would actually, most of us would wanna put together some diversification in their portfolios. And so we would wanna see how a 60/40 stock bond portfolio would do and how a 60/20/20 where we put fixed indexed annuities in with the stocks and bonds, or just entirely putting in, taking out the bonds entirely and putting in only the annuities in a 60/40 portfolio. Roger Ibbotson: 15:53     Well, we're looking at all these scenarios with the changing interest rates, and the changing stock market. It turns out that adding fixed indexed annuities is generally very favorable. It's mitigating the risk, and for the most part the returns are very good under these scenarios. Except if the stock market drops and you have fixed indexed annuities in the portfolio, that would have that equity exposure, but it will not actually participate fully in the drop of the market because the fixed indexed annuity itself will be principally protected over the two of three years. Jack Martin:        16:33     So, over your career, you've done a lot of work on asset allocation, obviously. How do you think FIAs fit into that traditional asset allocation mix? How do they fit on an efficient frontier? Roger Ibbotson: 16:48     Well, fixed indexed annuities are essentially lowering the risk of the portfolio. And but they're doing it in a way that you're actually getting some equity participation at the same time. So they actually do very well in a portfolio. So the portfolio itself is gonna have less risk as you add fixed indexed annuities to it, and for the most part, as you substitute the bonds out and put in the fixed indexed annuities, we would mostly predict that the fixed indexed annuities would outperform the bonds. So then actually, maybe the kind of the appropriate good storm here, where you end up with potentially less risk but more upside. Jack Martin:        17:30     So it sounds like that's a positive effect on a traditional efficient frontier then right? Roger Ibbotson: 17:36     Well, it's definitely a positive effect, of course an efficient frontier means higher ... you wanna get the highest return at the least risk, and here we're lowering the risk and raising the return, and so that's exactly what you would like as an investor. Jack Martin:        17:51     So, one of your areas of interest over the years has been investor behavior. So with the markets again hitting record highs this year, is greed one of those emotions that can adversely impact pre-retirees? Roger Ibbotson: 18:07     Yeah, I would say it's not only greed. It's actually I would say both fear and greed are the sort of the key ingredients of an investor, because when things are up they wanna be all in, and then as soon as things drop a bit, they get very careful. They would tend to have their own to swing perhaps, with the markets. What we're trying to really do is actually satisfy the behavioral characteristics of people, which I guess we could sum up as fear and greed. So, on the fear side, with the principal protection, once you alleviate that fear, people are actually willing to have some equity exposure. Of course, they wanted that equity exposure when markets are up, and if they didn't get it they get greedy, and they figure, "Well, I should have done that, I should have been in the equity market." But of course when the equity market goes down, they said, "Well, I shouldn't have been in the equity market." Roger Ibbotson: 19:05     Well, you've got that combination of fear and greed which kind of paralyzes people here, and this is what FIAs are really designed to take care of here, because we protect against that fear with the principal protection, and we actually satisfy their greed to some extent by participating with equity exposure in these products. And so, now if the markets are up and they have good returns, they're not upset anymore. Because they can be upset by just not being in the market. And the other hand when the market's down, and they are principally protected then they're upset. So, I said this was tailoring. These products are really tailored to meet the behavioral needs really of investors because they have on their own, they would have very much difficulty in actually taking on equity risk. Suzanne Lynn:    19:59     How prepared are you? Dr. Ibbotson is doing a great job of teaching us about the power of the fixed indexed annuity, and we'll get right back to the podcast in just a second. But, how prepared are you to integrate his research into building a more sustainable business? At InsurMark, we have a proprietary value engineering process that helps growth minded advisors get more out of their life's work. Advisors engaged with us in this process are realizing more client time, more family time, and more value from their business. That's what we call Driving Business Alpha. So check out our Value Engineering video at insurmark.net to learn more. Now, let's get back to Dr. Roger Ibbotson. Jack Martin:        20:47     So, we spent most of this podcast talking to Dr. Ibbotson. I'd like to turn to Dr. John Holmgren, who's President of Zebra Capital Management. John, I understand your firm has developed a new index for us in FIAs. Can you talk a little bit about how that works, and why investment advisors should be considering it? John Holmgren: 21:09     You know, it's right Jack, we have. If you look at the white paper, Fixed Annuities Consider the Alternative, we did that in such a way to make a more academic study, where we looked at a generic index, which would be similar to an S&P500, a large cap generic index on an uncapped basis. And really what we did, is we created the NYSE Zebra Edge Index, which is then utilized in the nationwide new heights platform, to create an FIA that's really harnessing these aspects that Roger was talking about. Particularly the idea of popularity, and we wanna have the less popular stocks that are also lower volatility, which then increases the exposure of the index that can actually be utilized in a risk controlled environment. John Holmgren: 21:58     So, we're using a behavioral financed drive investment philosophy that's designed to avoid and also the exploit the behavioral biases that Roger just talked about. And this is implemented in a systematic way that is designed to dynamically allocate between the equity index as well as the risk control, to maintain that five percent volatility. And in doing that, you know we really created a product which is really designed again as Roger had referenced, for long term investors who are looking to de-risk their portfolios yet participate in the upside of the equity market, while having a capital protection. And that's really kind of what we've done and how this whole process has evolved. Jack Martin:        22:44     So, should investment advisors look at that index a little bit differently than what we were talking about earlier with respect to FIAs? How should they be applying it? John Holmgren: 22:55     Well, it's really in the FIA context, as approaching retirement or in the accumulation phase, the latter stages of accumulation of assets. You know, looking at a way of de-risking. So, again back to the idea of a bond substitute as doing that, where the investor can get again, someone who's willing to invest long term. And I wanna be very clear that these strategies are not for everybody, but they're for longer term investors who are looking at an allocation for a certain time period, and looking also post retirement as well, because as you asked earlier about people in earlier stages of retirement or mid-stages of retirement, we really wanna have a flow of income who cannot withstand a sharp draw down, that's really what this is for. So it really fits into that context. I don't really wanna say that it's a new asset class, but it is an asset class that fits in. You know, somewhat of a hybrid between equity and bonds, giving you the volatility of, similar volatility to bonds but with higher upside potential. Jack Martin:        24:03     Well, this has been really enlightening, and I wanna thank you John, and I wanna thank you Dr. Ibbotson for taking the time to educate us about FIAs as a bond alternative. We also wanna thank Annexus for making the Zebra Capital Team, the new Zebra strategy, and particularly Dr. Ibbotson's work accessible to all financial advisors. And we wanna thank all of you who are listening, and we'll see you soon on the next JTalks Podcast. Suzanne Lynn:    24:31     Well, that was a powerful conversation. We have a simple way for you to get your copy of his white paper, along with info about the nationwide, and the NYSE Zebra Index that John Holmgren talked about. Go to insurmark.net and click on the Ibbotson podcast button. It's that simple. Thanks to Annexus for making Dr. Ibbotson and his research available today. 24:55     If you've got questions about FIAs, insurance, or Driving Business Alpha, please call one of our advisor development consultants at 800-752-0207. Stay connected with future episodes by subscribing today and keep posted on all our offerings by following InsurMark on LinkedIn.