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Amber Kuhn  

TPR nation, when it comes to prospecting, having a process in place, and one that you follow, is essential. But what impact does that process have on your prospects? What if it set expectations for them and help them get a glimpse of what it looks like to be a client. What if it helped put them at ease and allowed you to an exceptional experience? If you’re looking for a tried and true process, then it’s time to get Matthew Jarvis’s Sleep On It Process. This process will help prospects get answers to their critical questions and ensure that they feel confident in their decision to hire you as their trusted advisor. Visit theperfectria.com/sleeponit for your exclusive access. 

Matthew Jarvis  

Hello everyone, and welcome to another episode of The Perfect RIA podcast. I’m your host, Matthew Jarvis, and with me special guest Brian Smith, or some people called Smitty, who is a… Brian, Call your title! co owner

Brian Smith  

Co-owner of Foundational Income Associates, but Wholesaler. 

Matthew Jarvis  

Yeah, yeah. Well, here’s, here’s how I would describe. So you’ve worked with Micah and his dad, Floyd and his sister, Jamie, for how many years now? How long have you known the Shilanski’s?

Brian Smith  

I think we’re coming on 15 years now.

Matthew Jarvis  

Yeah and so for those of you that know Micah, or know of Micah, like Micah doesn’t surround himself with anybody who’s an idiot, for lack of a better term, like, if you’ve hung out with the landscapes for 15 years and been a valuable resource, like, You’ve got to renew your stuff and be good at fishing. I’ve heard you gone fishing with them a few times, but you’ve got to really know your stuff. And Brian, where your expertise is, is in annuities and insurance products. Now for our listeners who sometimes have an adverse reaction to that, who sometimes, like, wait a second, I don’t do that. That’s doing your practice an incredible disservice. And let me give you one quick example, like, so let’s run a scenario. And Brian, I know you’ve run into these, a client comes in or a prospect comes in and says, Hey, I talked to somebody, and they pitched me this product where I get all of the markets upside and none of the downside. It’s perfect, right? In other words, a fixed, indexed annuity. And as advisors, if we’re not in that space, we’re often tempted to say, well, that’s garbage, that’s junk, that’s whatever, and dismiss it. But there’s something about that that spoke to the client’s concerns, right? And if we dismiss that out of hand, what you’re doing is telling the client, hey, what’s important to you is not important to me. If instead, you can say, actually, it’s funny. Mr. Client, you should mention I’ve got this resource. This guy, Brian Smith, he is an expert in these things. Let me have him take a look at it. Let me have him shop this thing around and make sure it’s actually a good deal. And then let me have him let us know the pros and cons of this. Does that sound okay for you? Now, I’ve gone from an adversarial relationship to one where we’re on the same side of the table. So I guess, Brian, with that scenario, let’s, let’s kick this thing off, man. Like, is that a scenario run into? How do you help advisors in that spot? Run us through this thing.

Brian Smith  

 Absolutely, and that is a scenario that we see a lot, particularly with advisors that don’t use a lot of annuities. Yeah, you know, hey, I’m really working on a u m, and I don’t know that much, and so they just tend to avoid the situation, and I would encourage them to embrace it. But you don’t have to do it alone, right? You can call me. I’m going to look across the industry, find out what’s going on, or take a specific look at that particular product and say, OK, now, not all annuities are bad, not all annuities are good. It’s a tool. You have a lot of tools in your toolkit. If this isn’t one that you’re currently using that let me do some digging, find out what’s good right now with interest rates are where they are our product or more, it’s more competitive than we’ve seen in a very, very long time. In fact, better than I’ve ever seen since I’ve been in the industry. So what I’d say is, what is it about that particular product that interests that client? Is there something that’s even better out there? Unfortunately, one thing my industry does not do well is they tend to over promise and under deliver. But that doesn’t mean that all of the products do. Let’s fight, is it the safety that the client is interested in, or is it income? Or is it both? Yeah, let’s look across the industry. Find the very best thing with a very highly rated carrier with a great solvency ratio, and maybe there is a slice of that portfolio that would be appropriate for the annuity.

Matthew Jarvis  

Yeah totally in fact, to move away from the hypothetical Brian. Before you and I had met. I had a client. He sold his small business for a few million dollars. You’ve been an entrepreneur’s old life comes in. He says, Hey, Jarvis, listen, 1 million of this, $4 million what he sold his business for has to go into an immediate annuity. He’d done some research, and I will call him box. We call every client Bob. I said, Hey, Bob, you know what? About inflation? This was a few years ago, before rates had come up. I said, you’re locked into this thing. There’s no way out. There’s nothing for your kids. And he says, Hey, listen, Jarvis, I have been an entrepreneur my whole life, super high risk every single day. How am I going to be payroll? I want to lock this money into a pension, and you can help me do it, or I’ll find someone else to help me do it. I am going to do this no matter what. Now, thankfully, I had someone I could say, you know, what great news, Bob, I’ve got someone who’s an expert in this. But had I tried to argue with him, had I tried to say, this is a dumb move, I would have lost the entire relationship, and I wouldn’t have been doing him a service. But in a situation like that, right? That’s where I could then call you of it foundational income Associates, and say, Listen, I got his client. He’s 72 he’s got a million bucks. He wants to get a spiel like, what do we do here?

Brian Smith  

 Exactly, yeah, well, and particularly with spears, you know, it’s basically a commodity product. It is. So I’ve got software on or a DIA or an indexed annuity, I’ve got software that I can look across the industry and say, Okay, this is how much premium we’re going to put into it. How much is it going to generate? And people like to know that you’ve done your research, and we can actually send you client facing bill that say, Listen, I looked at the top 300 products. Here’s the top three. Here the ones that I think we should consider, you know. And then the client goes, Okay, well, he really did do his research. So I like to be the guy behind the guy. I like to be the expert that that holds up the advisors. The advisor can move forward with confidence with the client. So it’s the perfect role for me.

Matthew Jarvis  

Yeah, having that market analysis and having someone that can do it right, like I don’t have that software, and I don’t want to become the expert. I need to be the expert on other things. I had a different client situation. Just a year ago. They were trying to be sold by another advisor, a fixed, indexed annuity. And for this particular client, it did not make sense for their financial situation. It absolutely did not align with their goals. It didn’t align with their financial situation, and it wasn’t a very good product. And so I was able to reach out to at the time, my equivalent Brian of you, and say, Hey, shop this thing around for me so that we know how this even compares, back to the commodity comment. And so I was able to go back to client and say, Hey, listen, we need to chat about if this is a good idea or not, but just looking at this, it’s not even competitive. If this is a goal, we want to guess this is not the way to do that. And so is able to say, hey, this person you’re talking to, they’re just a really slick salesperson, and we need to separate that from the pros and cons of this product. Brian, I would be curious. You’ve, you’ve been doing this now for a lot of years. You’ve met with a lot of advisors. I’m curious things that emerge of advisors who do really well, and advisors who do not so well, who do poorly, right? Like, what are you seeing the best advisors do, or conversely, the worst advisors do? Because you’ve, you’ve now talked with 1000s of advisors, I’m sure.

Brian Smith  

Yeah kind of keeping in line with the previous podcast on The Perfect RIA by Tracy loans, he was talking a little bit about, you know, you don’t have to have a securities license. I think there is a barrier to entry, and it provides, not only education, but rates, sure. So whether, whether it’s a 65 or you’re a registered rep, or you’re a CFP, those kinds of things. First of all, I think, because there’s a barrier to entry, it’s good, right, that the experts have a little bit more than than the average. Bear nothing against insurance, only, not at all. But I would say, generally speaking, that’s the first thing when advisors can provide more of a financial plan, I think it provides a better reality for the client. They can look at estate planning, they can look at tax planning, they can look at income, they can look at accumulation. And so when I see that, I see advisors that are more well rounded, and then in that case, they understand there’s a there’s a tool for just about every given need. So be the first thing, yeah, to be able to across the industry, or if you’re not strong in a particular area, they bring in another expert to say, You know what? We don’t want to product, but I’ve got, I’ve got this strategic relationship that I trust him, and I want you to work with him or her, and then the best of the best know what they’re not great at, and so they don’t, don’t have time to do all the things. They don’t have time to look into all the product. They don’t have time to look across the industry. So when you know what you’re not good at, and then you sell. And that is, and that’s a, that’s a, I love to say advisors time, they don’t have time to look across the industry. That’s what I can do for them to know, know where you’re strong, play to your strengths, but also kind of insulate your weaknesses. And then I would say, you know, if you want to really pursue a large practice, not really does right? You have to strike that balance between lifestyle of of working 60 hour weeks and the kind of you want to bring in. But if you really want to get bigger, a lot of the top five that we work with are managing money in some form and doing some sort of active recruiting, whether that’s seminars or educational planning, or some way to bring in new blood, other than just referrals. And again, I’m not suggesting you have to do that. It’s a, it’s a balance between where you want to be and where you are and what you at home with you. 

Matthew Jarvis  

Brian, that’s a, that’s a good point. I mean, we’ve had the luxury of being on just a massive bull market for Well, I mean, really, since the financial crisis, right? Like since 2008 2009 we’ve only had a few hiccups. And so advisors who got in the industry in the last, I don’t know, 15 years, like, have only seen the markets go up. Like you could just sit around and your practice will go that will not always be the case, whether that’s next week or 10 years from now, again, that will definitely change. Want to pull on a thread something you mentioned as you talk to top advisors, they have people they can reach to fill their gaps, right? So again, these two examples I gave of clients, limited is I could have spent dozens of hours and only got a super high level view of maybe a couple angles of this thing, dozens and dozens of hours. Or I can make one phone call. I call Brian and say, Hey, listen, I got this situation. What do I do here? And it’s interesting when I do a lot of coaching, of advisors, my own advisors on my team, then across the industry, I’m always surprised how seldom people are willing to do that. But I say, I got this situation, I just call Brian Smith yet. Well, no, I didn’t. If I have an insurance question, that’s my very before I even spend 10 minutes looking at I could Brian a call, because odds are he’s got the answer. If he does it like, why not start there? Why start investing a dozen hours of my time when I can call somebody who’s who’s already a pro?

Brian Smith  

Yeah? Well, there’s, there’s a spectrum, there’s the advisor that doesn’t understand annuities, maybe doesn’t even like to, yeah, spend the time to understand why it might make sense for you know, particular part of the portfolio we have spent, I don’t know, hundreds of hours this year reviewing old variables might even be a dead asset to the to the advisor. Hey, you know what? You can reduce the fees, eliminate the risk, and probably get 30 to 40% higher guaranteed income. Is that not acting as a fiduciary clients, you’re actually looking at what they have. If it’s great, you can go back and say, Hey, listen, this thing is still kicking. If not, maybe it’s time to do a freshen up. We’ve got some clients here in Minneapolis that there’s a particular company, I won’t mention them, but they have a fairly average variable. It never really was great. It’s not great now, and I could provide higher joint income than what the guarantees were on the single income for the product, product that they have. So I’m like, Look at, look at the assets in your book. Are they doing what your clients want them to do for them, if not, you know, particularly for for all variable annuities, old fixed indexed annuities, let’s take a look at it. Let’s, let’s take it apart and put it back together. If it’s great, it’s great. If not, maybe you have ability to look at what, what is out there. Now, could we do something better for the client, you know, and then so that for the for the people that that don’t like them, we’ll spend the time to really dig in and help them understand. For the people that want to take a quick look and say, Hey, what you know, here’s what I’m thinking. What do you think? Absolutely, that’s a great product. However, we can help.

Matthew Jarvis  

No, I’m glad you had mentioned so those of us that have been in the industry a long time, right? We have variable annuities on the books that were like pre financial crises, which I guess for younger advisors. That’s hard to believe there was kind of an arm kind of an arms race leading to the financial crisis of the A’s, and for a long year time, like decade, especially low interest rates, they were the best thing available. But Brian, to your point, I know my office just went through and did this. You helped Micah’s office go through and do this. All the old annuities on the book go back through and have now again, to have my team do it. Now, I wouldn’t have been there was so much work and so much time, but to have your team go through and do it, because you’ve got the technology to do it, we went back to every client, about about two thirds of them we ended up replacing, probably close to 75% because your point higher income. Though, what’s interesting, Brian is the clients that were the most appreciative, the ones we didn’t end up changing. We went back to and said, hey, you know this old John Hancock account you’ve had for 15 years. We actually went and we had it shopped around, and it’s still the best thing available for your situation. And clients were ecstatic about that. They were ecstatic that we’re still taking care of that thing, that this thing they’ve had for 15 years, in their case, is still the best now, of course, the clients that we’re able to go to and say, Hey, you’re currently getting $2,000 a month guaranteed on this thing, and we can now get 2500 What do you want to spend the extra 500 a month on? They were they were equally ecstatic. But it’s something that’s got to be done across your book. Across your book.

Brian Smith  

No, absolutely. And the peace of mind of you knowing that you’ve looked through their entire portfolio and time is limited, I get it. There’s so much that an advisor has to look at, so much they have to take care of, and to be able to know, okay, you know what I looked at that? We checked the block. We haven’t looked at it. You know, maybe in a little bit with interest rates are right now, now is a perfect time to do that kind of deep dive. And we do get people that send us, you know, huge Excel spreadsheets. And obviously they send them secure, so we can go through those and look at them one by one. And yeah, it’s probably 60% of the time. We can make the client better. You know, 30% of the time at the toss by probably leave it alone, 10% or maybe 10 to 20% it’s like, wow. Whatever you got into back then was phenomenal. Don’t, don’t you dare move it, you know? And I’ve noticed advisors that tell me, Wow, you know what, when I, when I brought that back to my client, they were like, wow. So you’re not going to try to push me into something for an additional sale. No, we, we’re just looking at your situation. We want to make sure that you’re set up. Your kids are set up for the perfect future that involves a new sale. Great, if it doesn’t, great. 

Matthew Jarvis  

Yeah, this is, again, for advisors that have, really, whatever you have on your books. It’s annuities or life policies or long term care policies or wrap accounts, or AUM, whatever the case may be. I always wanted to go to clients every single year and say, Mr. Mrs. Client every year we look, we scour the entire industry to see if there’s any investment options that are better than what you have right now. Now, for us internally, that might just be a high level look like for all the years after the financial crisis, interest rates were zero. Those old VA benefits were spectacular. It was very easy to go to clients and say, there’s nothing like this available. And we could say that without needing to do a lot of deep research, but when interest rates came up, that’s when we had to say, All right, there is, in fact, likely better products. Brian, to your example, probably about half of these people, maybe two thirds, they would be better off making a change. That’s when we need to commit to doing that deeper work. Brian, if you don’t mind, I want to shift gears just a little bit. You as well as your company, foundational income associates are going to be at the retirement at the retirement Tax Services Tax Summit, one of our values sponsors there. Let’s talk about taxes as it relates to all these things, right? So we’ve got these old annuities. Let’s assume that they’re non there’s some knowledge. Find ones in there, right? If they’re inside of an IRA, and correct me at any spot if I’m saying wrong here, if they’re inside an IRA changing from one to another. That’s a pretty just straightforward thing. It’s it’s really an IRA rollover. But what about when we have non qualified money? Talk to us a little bit if you can about if it’s an existing account you have, or it’s a new client you’re bringing in, they’ve got a half million dollars in a non qualified annuity that they originally put 100,000 in a million years ago. How do we deal with the taxes on that stuff?

Brian Smith  

That’s a great question. Yeah, the the insurance companies are required to maintain what they call cost basis reporting, which is basically the original investment. So they have to keep reporting of not only the original investment, the gains on those products. So in the industry, you’ll hear 1035 exchange thrown out a lot. But what the industry has they’ve made that a broad brush statement, and unfortunately, people talk about moving money from an annuity to an annuity, and they call it all a 1035 exchange, actually a 1030 which is a very particular term, an IRS code for non qualified annuity to non qualified annuity, or cash value life insurance into a non qualified annuity. That’s all 1035 exchange refers to. You’re talking about qualified money. It’s either a direct transfer, moving from IRA custodian to IRA custodian, or a rollover where you know somewhere in between the client might get involved, but back to your non qualified Yeah, if you move non qualified from one annuity to another, non qualified annuity that is considered a 1035, exchange and a tax free exchange, the seating carrier will send cost basis reporting to the new carrier so that they can maintain that separation of principal and earning, if that makes sense, and They don’t always do a great job. So it’s not a bad idea in the middle of that 1030 change to talk to the seating carrier and say, Hey, listen, you’re going to send cost basis reporting. They are required to do it by the IRS, but you’re also required by the to maintain the speed limit, which nobody does. So…

Matthew Jarvis  

So, yeah, no, no, that’s that’s No kidding. Yeah, so, so functionally, it sounds like it works similar to an IRA rollover, as long as everyone’s done correctly. Let’s say that you do this analysis on an annuity. We’re gonna use the same, non qualified example, half million in it. They put 100,000 a basis way back when, and for whatever reasons, their goals have changed, and they don’t have a need for the annuity any longer. Like they’re like, Hey, we’re already just straight cash this thing out. Or perhaps they need the money. I’ve got a client right now. His wife is in a nursing home. She has a non qualified annuity that we’re using to pay for the nursing home, but now her needs are exceeding the income that’s available. So we’re gonna catch this thing. And can you speak to us on how the taxation works on something like that? 

Brian Smith  

You bet. You bet. So I think, since I don’t remember the exact year, Matt, I was only says 78 or 79 a few years ago they came out. Yeah, a long time before I was in the industry. But they created annuities were LIFO, last in, first out. So on a non qualified, a new take, a distribution, the last thing is the first thing out. So if you’ve got that same example, $100,000 cost basis and $400,000 of gain. If you take a withdrawal, the first thing that comes out are your earnings. So if you cash the whole thing out, she would have a $400,000 tax bill and 100,000 she’d already paid taxes on. And so when you’re thinking about distributions from an annuity. You want to keep that in mind, because, let’s say you put it into an income rider product, because you wanted to get lifetime distributions, then the first $400,000 would be taxable. The next $100,000 would be tax free. And if you get all of your money out and get into the insurance company’s pocket, then it would be fully taxable again, with an IRA interest. Pretty simple, you haven’t paid taxes on it’s going to be taxable forever, but not qualified. A little bit different.

Matthew Jarvis  

For some of our listeners. This is going to be 101, but it’s, I see people make mistakes on this. So this life was important to remember. It’s also important remember then annuity income is taxed as ordinary income, so even if it was invested in the s, p inside that and it had what we would deem as capital gains, same as an IRA doesn’t how the income was generated, ordinary income coming up now, Brian, speak to us. So again, this client example, which we’re dealing with right now. So your point, if they started taking out 100 a year, that first four years of distributions will be fully taxable as ordinary income. And then, for simple math, year, five days would come out. That year would be tax free. What if we were to annuitize this, right? What if, let’s do a four year decision? How does that change the taxation?

Brian Smith  

It’s a great question, you know, it’s, it’s interesting, when I first got into the industry annuitization, that was, was really all that was available? Oh sure, yeah, people, there was, there were no complaints about it. And then sometime in the last 10 years, annuitization became a curse word, but there are still purposes to use it. Sure annuitize a non qualified contract, you get an exclusion ratio. So in other words, the insurance company is going to take a little bit of principal and a little bit of gain and that over the length of the payment. So if it’s a lifetime payment, they’re going to take principle and basis, and they’re going to spread it out. And what that does is spread out your tax liability, right? Versus if you just take the distribution, if you if you cash to render the policy, obviously, in that scenario, $400,000 needs to be paid in taxes. $100,000 is already basis. So there are times where annuitization can be a better benefit. The other time, we won’t spend much time here, but you hear people that are are trying to be Medicaid friendly. Yes, you know, to try to, you know, shelter the money. That’s another scenario where annuitization is helpful. But in order to spread the liability of a tax gain, annuitization on a non qualified product is something that is advantageous. Hardly anybody talks about it anymore, but it can, it can be worth it.

Matthew Jarvis  

And again, whether you’re an advisor who, for whom insurance is a major component of your practice, or or you’re not even insurance licensed, and it’s not a piece, you’ve got to really understand this stuff, right? I was recently at a conference, and I was speaking, you know, provider that was there. And actually, I use them as well, great, you know, provider. And I always like to ask him, I say, hey, where Hey, where are you seeing your biggest claims? Where are you seeing the most claims right now? Because I always want to know, like, there’s one thing for us to talk in the industry, and for you and I to speculate, it’s another. It talks to the insurance company. They say, here’s where we’re writing the checks and their biggest claims right now. Brian, number one, biggest is wire fraud. So advisors get a fake wire transfer and they’re sending, they’re facilitating. That’s number one. Number two, Brian is not advising clients on the taxation of things like this. So an advisor has a client come in perspective. Client, they say, oh, yeah, this old annuity, this thing’s garbage. Let’s cash this thing in. They cash it in. In our example, the client then gets a giant tax bill. Says, Hey, you didn’t tell me this tax bill was going to come, and they file a complaint against the advisor, and this is becoming one of the top sort of, you know, claims. Now you might think to yourself, well, that’s why I have, you know, insurance. If I start tip, when you make an Eno claim, your you know, premiums go through the roof. You can also lose whatever affiliations you have. So let’s say you’re you’re with Schwab, if swab sees you’re making claims that they can kick you off their custody platform the next day. No questions asked. So understanding how these things work. Or again, Brian, I don’t feel like there’s an endless plug for you to say, Listen, anytime I see an annuity come across my desk. Anytime I see a long term care policy or old cash value life policy, I get to send a copy over to Brian’s team, if only because, if this turns into a problem for me, the tax thing, the beneficiaries, whatever the case may be, I can then show, hey, listen, I reached out to another expert. Here was the insight that they gave me that buys you so much time. So Brian, with with all that in mind, right with this idea that there’s more claims than ever against advisors who are forgetting these tax things when an advisor sees an annuity come across their desk, life policy, a long term care policy. How do they fall into these traps, whether it’s the taxation trap or just not understanding it like, are there other traps that they should be watching out for when these things come across their desk? 

Brian Smith  

Yeah, you know, it’s interesting that that does happen, Matt, and it happens with, typically, policies that an advisor didn’t necessarily sell, but have taken over we don’t necessarily know what they have, and if the advisor doesn’t know what they have, and annuities are complex, it’s pretty, pretty good chance that the client doesn’t know what they have. So I would say, Let’s pause. Let’s take a look at it, send it to me and my team. We can do some scrubbing. We can dig into what it is, and you know what is supposed to do, so that we can make an educated decision. You know, you don’t have to know everything. You got to know the right kinds of people, you know. And we don’t know everything, but we know a lot about annuities. So if we can jump in and kind of ascertain all right, this is how the product works. This is what it was intended to do, and then maybe some of the pitfalls that you might get, particularly as it relates to distribution, brought it up, what’s going to happen if my client does this, or is there another option at the entrance company offers that maybe isn’t on the statement, that we could get to a better resolution for the client? So the statement, let’s do some digging and have some discussion, so that you can be educated when you talk to your client and available.

Matthew Jarvis  

One other thing that comes to to mind, Brian will wrap this episode up, is clients with, and again, if you’re working with retirees with old life insurance policies. So I see prospective clients come in, or new clients come in, and they’ll have these old policy is that, in fact, I worked recently a client. He’s in his 80s. He and his wife in their 80s, they had some policies they had taken out in their 20s. So 60 years earlier, they had taken out these old Whole Life policies and had just sent the $112 a month in, or whatever it was, and so on the get love your thoughts. Whenever I see those, I always tell clients, hey, listen, we need to see what’s really going on, like we need to look behind the curtains here. We’re going to call in together and get what’s called the force illustration. Now that doesn’t mean anything to you, Mr. Mrs. Klein, and the report that they send back is going to look like total Greek. It’s really not going to make any sense. But great news, myself and the experts that I work with, we speak that same language. We speak that Greek, and we’re going to decipher and figure out what makes the most sense. And then we have in Tracy and I talked about this on our last episode together on insurance. Want to see, hey, what is the best case scenario and what is the worst case scenario? What’s everything in between? And again, back to the annuity example. Maybe it makes sense to make a change. Maybe it doesn’t make sense, but either way, I’m the first person in 60 years for this client who’s ever said, Hey, let’s take a look at what’s going on here. Make sure this is still in line with your goals.

Brian Smith  

 Exactly. Well, in you brought up a couple different things there that I really like Matt. Number one is sometimes to get the client on the line to call the insurance company and say, All right, literally, we want to know what the guarantees are. Yeah, the G word is important. We’ve all been burned by carriers that are promising, IMOs that are hyping. We need to find out what the guarantee what is this product really doing? If you pull back the covers, sometimes they’re great, sometimes they’re really not great. The performance that was promised has not been experienced. So I like to really focus on the guarantees. What is it? Guaranteed Income. Not hypothetical income, but guaranteed income. Oh, the s, p cap is currently 9% how long is that cap? 

Matthew Jarvis  

I’m glad you brought that one up. That’s like, my biggest beef with FIA illustrations, right? Like, oh, the cap’s going to be 15% forever. No, what’ll probably happen is, it’s 15% year one and year two, it’s 2% or some dismal number, but yeah, yeah, what is, what is the cap after year one? Yeah, big, big thing.

Brian Smith  

Well, and the insurance companies have learned from this, and now there are a couple carriers that will actually guarantee that that cap does not drop for the duration of the surrender charge date. And if I can get an A plus rated carrier with a good solvency ratio that guarantees that they won’t drop their cap on me. That’s where I’m going first, right up a little bit of the hype with some of the other companies. Maybe I could get 11% but what I don’t want is rate attrition. Clients don’t like to get statements where the opportunity next year is less than the opportunity at this year. So if guaranteed income, let’s make sure it’s guaranteed. Yeah, and if we’re talking about accumulation, I want to make sure that I can, I can expect reasonable rate of return, and that the insurance company isn’t going to, you know, cut my legs out from under me, because as someone that that works for the advisor, if that happens, the client is not happy, which makes the advisor unhappy, which makes me not look good. So I would like to under promise, over deliver and offer guarantees to the client, because ultimately, that’s probably why they’re going to the insurance product in the first place. 

Matthew Jarvis  

Yeah, yeah, no, for sure is all right. One last question for you, Brian, we really got to wrap this time. Are a friendly annuities there. So this idea of of annuities that are, whether they’re VAs or whatever, the people with, basically without insurance licenses can write, they can charge an AUM fee. What are you seeing in that space? Separate the hype from the reality here for us? What’s going on there?

Brian Smith  

Yeah, the advisory annuity. Interesting for the first time this sell a multi year guaranteed annuity, a, my God, as an advisory annuity. Yeah, that was new to me. Yeah, it is crazy, yeah. But I think it gets it gets back to advisors that really just want to be able to say to their client, I don’t receive commissions. Now, I don’t necessarily see anything wrong with Commission, as long as it’s disclosed. Yeah, but if that’s what you want, there is a way, whether it’s a fixed annuity or an indexed annuity, RYLA buffered product, or even a variable annuity. There are ways that you can sell an annuity that you charge a fee on, and in many cases, the opportunity that is given by the insurance company is better than some of the products with commissions. And when they first came out, Matt, it was a disaster. 

Matthew Jarvis  

He didn’t know they were priced the same. It was great. The insurance company loved them. They’re like, Yeah, we have this fee only annuity. It’s the same rates as the commission. Well, we’re just going to keep the difference. I mean, they love that. And there were suckers all day long that were taking those things on.

Brian Smith  

But then the insurance company, the feed of the client, was under 59 and a half. They got a penalty issues there. So it’s been about three years, and now they’ve really cleaned it up to where there is an opportunity for income and growth and protection, where you’re charging a fee, whether that’s, you know, 50 basis points, or up to a point, whatever your model is, there is, there’s so much crossover now. There’s so much opportunity. The products have never been better. And the insurance companies are learning that there are people that don’t want commissions. Okay, all right, that’s perfect. We offer those two. You just got to let us know what we what what your clients want, and what you want for your practice and and we’ll find you one, but they’re competitive now. It’s been an interesting transition. 

Matthew Jarvis  

You know, I love this, and Brian, I appreciate your discussion. I’m looking forward to seeing yourself and foundational income associates at The Retirement Tax Services Tax Summit at the end of September, for all of our listeners, two actions, one I hope, is abundantly obvious, that if you any annuities or insurance products on your books, these need to be gone back through. With the fine tooth combs, rates have changed dramatically. What you took out a couple of years ago or decades ago is likely not as good as what’s available today. The second thing, if you’re an advisor that has none of those products on your book, don’t have a single annuity, a single insurance policy, nothing. You still need to be having this discussion with clients, right? The markets are at all time high. We’re at a What are we on? A 14 year bull market that will change at some point, and if it changes in a bad way, real dramatically, let’s say the markets go down 50% like they did at 2008 2009 and you’ve never had a conversation with your clients about mitigating risk that is going to bite you. Brian, and I’ve been in history long time. I remember 2008 2009 very quickly. And I remember advisors getting sued left and right by clients and saying, Hey, you never told me how to hedge this risk. Now that doesn’t mean you need to put all your clients in an Fia, maybe does. Maybe does it. It means you need to have that discussion. Mr. Mrs. Client markets are at all time highs. We’ve been 14 years. 14 years. There are ways to take risk off the table. It’s not free. It’s going to cost us, but there are ways to take risk off the table. Do you want to have that discussion, which we document in writing and an email that way, at a minimum, as a CYA, but really, as a dishwasher rule, you are bringing more value to the table. And so when you have that discussion, and some of your clients inevitably say, actually, yeah, I would like to talk about that, that’s when you call Brian. Instead of becoming an expert yourself, you said, Brian, I got this client. They got 3 million bucks. They’re 65 they want to take some risk off the table for politics, whatever reason. What are my options? And you can have someone like Brian shop that around for you and put you and put you in a good spot. So Brian, again, thank you so much for your time, for supporting our conference. For all of our listeners, you can find Brian’s contact information in the show notes and at foundationalincome.net is his website. And until next time, happy planning. Today’s episode is brought to you by Growth, not just anyone’s growth, but your growth, more specifically, the growth of your net income, that depends on your tax return, the money that goes home to your family, growing your net revenue, doubling it in the next 12 to 36 months. Now, why that range? That is the range where Micah and I have, both in our own practices and in hundreds of advisor practices we’ve coached, been able to double their net revenue. That’s a bold claim, but it’s backed by a lot of experience our own. And again, the practices we’ve coached go to theperfectria.com/grow  G, R, O, W, to learn how we can help you double your practice like we’ve done for so many others.