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Agency Building for Financial Planning: Opportunities, Compensation, and Guaranteed Products

Discover the principles of agency building for financial planning, including competitive compensation and unique products. Learn about the six areas of financial planning and the benefits of term and universal life insurance. Explore options for premium payment and cash value accumulation, and understand the hierarchy of life plans. Gain insight into beneficiary designations, waiver of premium, and 1035 exchanges. Discover the benefits of annuities and IRA rollovers for retirement planning.

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Agency Building for Financial Planning: Opportunities, Compensation, and Guaranteed Products

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  1. Rights Reserved Principles of Agency Building18th Edition September 5, 2013 By:Roberto H. Bruce, MS, CLU, ChFC, LUTCFCavaliers Insurance Marketing www.aalliance.com

  2. Rights Reserved Agency Building Opportunity • Strong Companies • Unique Products • Ground Floor Opportunity • Competitive Agency Compensation

  3. Rights Reserved Train Recruit The Ultimate of Selling is Agency Building Sell

  4. Rights Reserved Six Areas of Financial Planning • Income Allocation • Management of Risk • Investment Planning • Tax Planning • Retirement Planning • Estate Planning

  5. Rights Reserved Term – Insurance For A Specified Period $ CCOI $ T T age T1 T2 1 Flexible Premium2 Adjustable Death Benefit3 Current Interest Rate4 Guaranteed Interest Rate UL

  6. Rights Reserved Premiums YR 1— $5,000— $4,000 $ 2—10,000 — 5,000-9,0003—15,000 — 7,000-16,0004—20,000 — 5—25,000 — 6—30,000 —7—35,000 — Net Level 7 Pay Test Tamra 88 eg. $5,000 M.E.C Annuity Single eg. $25,000 Guide Defra 85 Level eg. $2,000 Target Minimum Premiums

  7. Rights Reserved TRA’ 86 PREM InterestIncome PREM PREM PREM Interest Income FIFO LIFO INSURANCE ANNUITY 59 ½ - 10% Penalty

  8. Rights Reserved Life Insurance Tests Cash Value Accumulation Test – not more than single premium for lifetime or Guide Premium Test, and Corridor Test– Age 95

  9. Rights Reserved Options $ 100,000 Amount At Risk OPT ALevel Face Amount Savings T t1 95 $ 100,000 OPT B Increasing Face Amt or Face Amt + Savings Amount At Risk Savings T t1

  10. CCOI+ Policy Fee+ PREM Charge+ Charge / $1,000 TCOI = Rights Reserved Policy Costs PREM – TCOI = Policy Fund Cash Accumulation Value Policy Fund – SURR Charge = Cash Surrender Value Cash Value

  11. Rights Reserved Hierarchy of Life Plans • Why buy life insurance ???? • Because of GUARANTEES !!!!

  12. Rights Reserved Hierarchy of Life Plans • Whole Life – Par WL (Non-Med 250k, Med), Simplified Non-Par WL (Level, Graded, Modified), Single Premium Par WL • Universal Life – Lifetime Guaranteed UL, Cash Accumulation UL (Indexed UL, Traditional UL) – Non-Med 250k, Low Premium UL • Term – Guaranteed Premium Term (Non-Med 350k/250k, Med) w/ or w/o ROP, Annual Renewable Term (ART) - PS1 (Group Term Life)/PS58 (Split Dollar) Tables

  13. Rights Reserved Parties To A Contract • Owner • Insured • Beneficiary Three - Gift Tax One - Estate Tax Two – Recommended Disclaimer, if not taken

  14. Rights Reserved Waiver Of Premium • In case of disability • Always recommend • Disclaimer, if not taken

  15. Rights Reserved 1035 ExchangeNon-taxable exchange of certain life and annuity contracts • Life insurance to life insurance • Life insurance to annuity • Endowment policy to annuity • Annuity to annuity • Life insurance to qualified LTC • Annuity to qualified LTC • Qualified LTC to qualified LTC

  16. Rights Reserved Beneficiary(ies) • Primary • Contingent / Secondary • Per Capita • Per Stirpes

  17. Year 2011 10,000 baby boomers, born 1946-1964, retiring everyday and increasing thereafter for the next 19 years

  18. IRA Rollover Example $5,000/month Target Income = $60,000/year @3% rate = $2,000,000 @5% rate = $1,200,000 @7.5% rate = $800,000

  19. Rights Reserved Annuity 1 or more premiums (accumulation) 1 or more payments (distribution) Tax-Deferred 59 ½ 10% Penalty Ordinary income Capital gains 1 – Single premium Immediate – SPIA Deferred - SPDA 1 or more - Flexible premium FPA/FPDA FIX – General Account VARIABLE – Separate Account QUALIFIED NON - QUALIFIED IRA (Front)-70 1/2DEDUCTIBLE NON-DEDUCTIBLE ROTH-IRA (Back) DIRECT TRANSFER / ROLLOVER / CONVERSION 1035 Exchange TRADITIONAL IRA / ROTH-IRA / SEP-IRA / SIMPLE IRA INDEX / TREASURY LINKED / MYG/MVA

  20. Rights Reserved Annuity Ideal Cases • As(SPDA $2,000) • A(SPDA $4,000Q; $5,000NQ)

  21. Rights Reserved Plan Distributions – When to? • Die, Disabled, or severance from employment • Plan terminates, no successor plan • 59 ½ • Financial hardship* *Cannot rollover to IRA

  22. Rights Reserved Early Distribution Penalty(Plan, IRA, Annuity) • 10% tax on distributions under age 59 ½ • In addition to any regular income tax on the amount

  23. Rights Reserved Penalty Free Plan Early Distributions • Death or Disability • Distributions over life expectancy on termination of employment • Service separation after age 55 • Qualified domestic relations order • Medical expenses over 7 ½ % of AGI • Distribution election by March 1, 1986 • Dividends on employer securities • IRS levy of plan • Qualified reservist distributions

  24. Rights Reserved IRA Rollover • Distribution from one qualified plan • Contribution to IRA within 60 days

  25. Rights Reserved Types of IRA Rollover • Direct - qualified plan to IRA, no 20% tax withholding • Indirect - qualified plan to individual to IRA, with 20% tax withholding

  26. Rights Reserved IRA Rollover Exceptions • Series of substantial equal payments based on life expectancy, or 10 or more years period certain • Required minimum distribution (RMD) • Corrective distribution • Loan treated as distribution • Hardship distribution • Dividends on employer securities • Cost of life insurance coverage • Distribution to beneficiaries

  27. Rights Reserved Penalty Free IRA Early Distributions • Unreimbursed medical expenses over 7 ½ % of AGI • Not more than cost of medical insurance • Disabled • Beneficiary of deceased IRA owner • Distribution in form of annuity • Not more than qualified higher education expenses • Used to build, rebuild first home $10,000 or less • IRS levy of qualified plan • Qualified reservist distributions

  28. Rights Reserved Required Minimum Distributions(RMDs) • Minimum amount to withdraw annually starting with year at age 70 ½ , or if later, year retires (except 5% business owners) • Amount not withdrawn taxed at 50%

  29. Rights Reserved IRA Rollover/Direct TransferTrigger Ages • 55 - A person separating from service after age 55 normally will not be subject to 10% tax penalty for early distribution from pension plan before age 59-1/2. • 59-1/2 - There will be 10% tax on pension plan, IRA, and annuity taxable distributions under age 59-1/2 in addition to any regular income tax on the amount. • 62 - Early retirement age for social security benefits. • 65 - Full retirement age for social security benefits for those born in 1937 and earlier; retirement age increases by two (2) months for every year over 1937; time to apply for Medicare. • 66 - Full retirement age for social security benefits for those born in 1943 to 1954; retirement age increases by two (2) months for every year over 1954. • 67 - Full retirement age for social security benefits for those born in 1960 and later. • 70-1/2 - There will be a Required Minimum Distribution (RMD) from pension plan or IRA starting with year at age 70-1/2, or year of retirement , if later, for pension plan. Five (5) % business owner requirement remains at age 70-1/2. Amount not withdrawn is taxed at 50%.

  30. Rights Reserved Placement Ratio • Issued over submitted apps • Pre-qualify prospect • Concept selling • Trial app / no initial premium for borderline cases • Initial payment w/ app • More apps, e.g., Juvenile plans • Case follow-up

  31. Rights Reserved Persistency Ratio • Active over issued policies • Modal payment hierarchy • Annual, 7 Pay, or Single • Monthly bank draft • Semi-annual • Quarterly • Monthly direct billing • Client contact/review • Improve placement ratio

  32. Rights Reserved Goal Setting • $$$$ • Sale/Network • Appointment 1. Calls ——————— 3 min NO NameCompanyPurposeAppt. $TimeNeed T1 T2

  33. Rights Reserved Goal Setting $250,000 – ESD/SGA$100,000 – MDRT $75,000 – Convention $_______ A.P. Goal÷$_______ A.P./Sale Sales/Year x_______ Appt/SaleAppts/Year÷52 Wks 100,000 1,000 ___ min/call ___ calls/appt ___ hrs/appt ___ appt/sale 3 20 100 2 2 2 200 1,000 $_____ Annual Prem (A.P.)/Sale 4 Appts/Wk x_______Calls/Appt 20 80 Calls/Wk x 2 Hrs/Appt x 3(min/call)/60(min/hr) 8 Appt Hrs/Wk 4 Call Hrs/Wk + 12 Hrs/Wk Total

  34. Aalliance Management Expectation/Commitment(Calendar Year) Rights Reserved

  35. Rights Reserved Agency Building Blocks 1) Recruit - Producer, Recruiter 2) LEG 3) Magnificent “Seven” 4) Rule of “Three” 5) Principle of the understudy 6) Bottom/Top Approach 7) Recruit-Train-Sale Cycle 8) Teamwork/Involvement 9) Lead from the front 10) Quality vs. Quantity – Collect/Select 11) Generalization-Specialization Cycle 12) Simplify - KISS 13) Sowing/Reaping - Stout-Hearted 14) Set the example 15) Go forth and multiply 16) Numbers game - +/-, Attrition, Prime, Progression 17) Curves- Straight line, Pulse, Supply, Ravine / Death-defying, Crash-landing, Sine, Square, Cubic 18) Anarchy a) Absence of Rulesb) Rules are impossible to implementc) Nobody is implementing the rulesd) Rules are being violated with impunity 19) Five Pillars - Professionalism, Persistency, Perseverance, Production, Proficiency 20) Management Cycle - Planning, Organizing, Staffing, Directing, Controlling 21) Goal Setting 22) 7 C’s of Success - Commitment, Competence, Concentration, Consistency, Creativity, Control, Conduct 23) Maximin = Minimax

  36. Rights Reserved Recruit • A recruit is not a recruit without a recruit • A recruit is both a producer and a recruiter

  37. Rights Reserved LEG A leg is not an effective leg without another leg

  38. Rights Reserved Magnificent “Seven” • Tested to be the most efficient • Seven members of a squad • Seven days in a week • Less-not enough, inefficient More-Too much to handle

  39. Rights Reserved Rule of Three Out of the seven, select your best three

  40. Rights Reserved Principle of the Understudy Out of your best three, select your understudy that can duplicate or replace you

  41. Rights Reserved Bottom/Top Approach • Service the bottom • Inform all at the top

  42. Financial Independence RECRUIT SELL Marketing Structure Professional Development Rights Reserved TRAIN Cycle of Success

  43. Rights Reserved Teamwork/Involvement • No man is an island • The whole is more than the sum of its parts • Congregation

  44. Rights Reserved Set The Example Lead from the front in sales, recruiting, and training

  45. Rights Reserved Quality vs. Quantity Collect and collect; and then select

  46. Rights Reserved Generalization/Specialization Cycle

  47. Rights Reserved Simplify K I S S Keep It Simple and Sincere

  48. Rights Reserved Sowing/Reaping • What you sow you reap a thousand times • Stout hearted men

  49. Rights Reserved Go Forth and Multiply • The ultimate of selling is in agency building • If you don’t talk about recruiting, it will never happen

  50. Rights Reserved Numbers Game +/- Attrition Prime Progression Arithmetic Geometric

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