Friday, March 29, 2024
Home Authors Posts by David J. Murphy

David J. Murphy

69 POSTS 0 COMMENTS
CLU, ChFC, FLMI, is a director, vice president, team leader, speaker and mentor for Global Leadership Partners. For nearly four decades Murphy worked in the financial services industry, and has held positions in sales, marketing, product development, training and development, distribution, agency management, and recruiting. In his latest role he was responsible for managing National Account relationships. In this role he shared business leadership and practice management concepts with business owners, marketing organizations and independent financial professionals. He is a frequent contributor to industry trade journals and a keynote speaker at industry events. After 37 wonderful years in financial services, it was time for Murphy to give back, to share with others the training, development and experiences he enjoyed by God’s grace, and encourage others who are just starting out or seeking to grow. Global Leadership Partners identifies, equips and sends business leaders to speak at leadership seminars in partnership with organizations primarily in Eastern Europe, but eventually, around the world. The intent is to foster development of foreign leaders who will courageously stand for strong values and a high ethical standard. This work is based on the belief that the world will be a better place when filled with leaders who lead according to proven values and bedrock principles. Murphy is a frequent contributor to industry trade journals and is available as a keynote speaker for life insurance industry meetings and training events. He can be reached by telephone at: 312-859-3064. Email: murpd191@gmail.com. Twitter: https://twitter.com/InLifeOnPurpose.

The Quiddity Of Life Insurance

Annie Dillard’s essay entitled Total Eclipse is considered to be a masterpiece of literary nonfiction. Dillard describes her personal experience of a solar eclipse in Washington State. She describes a total eclipse in terms that define its uniqueness.

“The second before the sun went out, we saw a wall of dark shadow come speeding at us. We no sooner saw it than it was upon us, like thunder. It roared up the valley. It slammed our hill and knocked us out. It was the monstrous swift shadow cone of the moon. I have since read that this wave of shadow moves 1,800 miles an hour. Language can give no sense of this sort of speed—1,800 miles an hour. It was 195 miles wide. No end was in sight—you saw only the edge. It rolled at you across the land at 1,800 miles an hour, hauling darkness like plague behind it. Seeing it, and knowing it was coming straight for you, was like feeling a slug of anesthetic shoot up your arm. If you think very fast, you may have time to think, “Soon it will hit my brain.” You can feel the deadness race up your arm; you can feel the appalling, inhuman speed of your own blood. We saw the wall of shadow coming and screamed before it hit.”1

A total eclipse may be the very best way for human beings to experience “the universe as a clockwork of loose spheres flung at stupefying, unauthorized speeds.”2

A total eclipse is its own thing, unlike all other things.

C.S. Lewis wrote: “we should attempt a total surrender to whatever atmosphere is offering itself at the moment…and make the determination to rub one’s nose in the very quiddity of each thing, to rejoice in its being (so magnificently) what it is.”3

That is what Dillard was intending to do in her essay.

Author, speaker John Piper includes Lewis among the writers that influenced him most. Specifically, Lewis taught Piper to attend to the realness of things. “To wake up in the morning and to be aware of the firmness of the mattress, the warmth of the sun rays, the sound of the clock ticking, the sheer being of things (quiddity as he calls it). He helped me become alive to life. He helped me to see what is there in the world—things which if we didn’t have them, we would pay a million dollars to have, but having them, ignore.”4

Note: The word “Quiddity” (noun) comes from the Latin “quid” which means “what.” It is defined as “The very essence of; the inherent nature of something or someone.”5

Synonyms of quiddity include actuality, essence, existence, integral, quintessence.6

Quiddity is the “thingness” of a thing. The “thisness.” The essential essence or “whatness” of what makes something what it is.

Question: What is the quiddity of that thing we call a butterfly? Is a butterfly’s “thingness” the entirety of its history? In the moment that we see a butterfly are we also imagining when it was an egg, a caterpillar, its chrysalis, where it traveled, or all the flowers it visited?

When we explain something, we do not generally divide it into its parts, describe how all the parts behave, or present its entire history. When telling someone about our new car we may elaborate on some of its features, but we are not likely to delineate every part and how they work together to make it run.

The Quiddity of Life Insurance
Life insurance has its own quiddity, thingness, thisness, and whatness that makes life insurance what it is.

Question: As independent financial professionals, how adept are we at communicating winsomely, and engagingly, the quiddity of life insurance?

Starting point:

  • Life insurance is a contract between an insurer and a policy owner.
  • Life insurance is a promise made by the insurance company in exchange for the policy owner’s premium payments.
  • Life insurance policies identify the following:
    • The insurer: A company regulated by state insurance departments.
    • The policy owner: The person who owns the policy.
    • The insured: The person whose life is insured.
    • The beneficiary: The person named by the policy owner to receive the policy’s death benefits.
  • Life insurance pays a death benefit to the person named by the policy owner when the insured dies.
  • The beneficiaries can use the money for whatever purpose they choose.
  • Life insurance is regulated at the Federal and the State level.

So far, we have only described the parts. We have only kicked the tires.

We have not yet treated potential consumers as the feeling, relating, seeing, listening, smelling, receptive creatures that they are. Nor have we begun to explore the magical, relevant, terrifying, and ecstatic aspects of life insurance.

Time to take it out for a test drive!

  • Life insurance solves a frightening financial problem. When a person dies, earned income disappears. A spouse, children, or anyone dependent on the insured financially, will be left without support.
  • About the time unpaid bills are overdue, and the grieving family members are under severe stress, the life insurance death benefit arrives, providing funds to meet financial obligations.
  • Money appears in time to help relatives pay for burial and other end-of-life expenses.
  • Life insurance provides a replacement for the income that the insured intended to use to cover these expenses:
    • Mortgage payments.
    • Childcare to replace the loss of a stay-at-home parent.
    • Giving freedom for family members to make it through college.
    • Debts such as car loans.

Wait! Have we really arrived at the very quiddity of Life Insurance? No. Try these:

  • Life insurance is designed to help people take care of their loved ones who are dependent on the Insured’s income.
  • Life insurance helps a family keep the family business in the family.
  • Life insurance helps responsible people experience one less thing to worry about at night.
  • Life insurance avails thoughtful people the opportunity to finish life well by providing for loved ones even in death.
  • Life insurance prevents economic hardship from being added to emotional distress.
  • Life insurance replaces obstacles with opportunities.
  • Life insurance provides peace of mind.
  • Life insurance can be a gift of love.

Now that, finally, is the quiddity of life insurance.

Application
In her essay, The Givenness of Things, Marilynne Robinson points out that “We know only what we know, only in the way that we know it or can know it.”7

What if we met people who were curious about a red rose in a vase on our desk? How could we persuade them of its worth? Would we start by warning about the possibility of pricking fingers on its brutally real thorns? Or would we encourage them to rub their noses among its perfumed petals? To fully explain a rose, we need to juxtapose the pain with its beauty.

We can postulate that potential consumers (future policy owners) will only know about life insurance what they know, only in the way they know it, based on the knowledge they have gained from reading or hearing others discuss it.

For the independent financial professional there are therefore two opportunities in regard to communicating the quiddity of life insurance:

  1. Enhance what people know about life insurance by providing educational, relatable, authentic, and practical information.
  2. Make it easier for people to learn more about the quiddity of life insurance by preparing engaging stories and practicing the art of highlighting the power of life insurance to fulfill dreams, activate love, and keep promises.

Summary
Annie Dillard wrote about seeing a mockingbird make a straight vertical descent from the roof gutter of a four-story building. “…The mockingbird took a single step into the air and dropped. His wings were still folded against his sides as though he were singing from a limb and not falling, accelerating thirty-two feet per second, through empty air. Just a breath before he would have been dashed to the ground, he unfurled his wings with exact, deliberate care, revealing the broad bars of white, spread his elegant white-banded tail, and so floated onto the grass. I had just rounded a corner when his insouciant step caught my eye; there was no one else in sight. The fact of his free fall was like the old philosophical conundrum about the tree that falls in the forest. The answer must be, I think, that beauty and grace are performed whether or not we will or sense them. The least we can do is try to be there.”8

Dillard saw this moment, felt in her soul the quiddity of it, and wanted to share it with others.

We all want to enjoy the chocolate-ness of chocolate and the coffee-ness of coffee. Similarly, we who know its value should want people to grasp the quiddity of life insurance.

The least we can do is come alongside people to help them see what we see.

Footnotes:

  1. https://www.theatlantic.com/science/archive/2017/08/annie-dillards-total-eclipse/536148/.
  2. Ibid.
  3. “Surprised by Joy: The Shape of My Early Life,” C.S. Lewis, HarperOne; Reissue edition (February 14, 2017).
  4. John Piper, “Books That Have Influenced Me Most.” https://www.desiringgod.org/articles/books-that-have-influenced-me-most.
  5. https://www.collinsdictionary.com/us/dictionary/english/quiddity.
  6. https://www.thesaurus.com/browse/quiddity.
  7. “The Givenness of Things: Essays,” by Marilynne Robinson, Farrar, Straus and Giroux (October 27, 2015).
  8. “Pilgrim at Tinker Creek,” by Annie Dillard, (Published June 1, 2000 by Harper Perennial) (first published 1974).

May It Be Holy

In a certain Middle Eastern country, the local phrase for “Congratulations!” directly translates to “May it be holy!”—isn’t this an excellent cheer for new babies, weddings, new homes, and job promotions?

an you imagine how different LinkedIn notifications would be if, upon your work anniversary or promotion, you received “May it be holy!” messages instead of “Congratulations!”?

Question: Is there a degree to which the financial services business can be considered holy?

What Is “Holy?”
Holy is deeply embedded in religious concepts and vocabulary. The Jewish and Christian sacred texts, in particular, are replete with usage of Hebrew and Greek words translated as the English word “holy.”

In the Old Testament there are over 830 instances of the term in all its forms.
“Holy” is often used to describe God’s glorious nature, which is majestically, radically distinct from all creation.

Is there more to this concept other than its religious meaning?

Hebrew is an interesting language because words carry the meaning of the original root word. Therefore, the Hebrew word most commonly translated “holy” is “Qodesh” which comes from the root word “Qadash.” This word means “to set apart for a specific purpose.”1

Holy is that which is separated from the normal in a conceptual way.

In this sense, something can be considered holy if it is set apart from everything else to do a specific job for a unique purpose.

How Can Financial Services Be Set Apart, or Holy?

Question: As an independent financial professional, can the work that you do become holy—in the sense of “set apart?”

After four decades in independent financial services, I have concluded that only one thing defines our efforts as holy: To the extent that we activate, implement, validate, employ, execute, put into practice, and help one person carry out love for another, our work is holy.

Shakespeare wrote, “Thy advice, this night, I’ll put in practice.”2 (Reading this out loud sounds a little Yoda-like!)

In independent financial services, we make it a habit of saying, “Your love for your family, this night, I will help you put into practice.”

Love Is Holy
It was again William Shakespeare who wrote, “Love is holy.”3

Similarly, Author Marilynne Robinson wrote, “Love is holy because it is like grace—the worthiness of its object is never really what matters.”4

Question: What does financial services have to do with love?

Everything. Consider:

  • Why do people buy long term care insurance? According to the National Institute on Aging under the U.S. Department of Health and Human Services, the prudent person should “Begin by thinking about what would happen if you became seriously ill or disabled. Talk with your family, friends, and lawyer about who would provide care if you needed help for a long time.5 Why would they take care of us? Our care will be the responsibility of the people who love us and on whom we depend.
  • Why do people buy disability income insurance? According to the United States Government, people who care for their “loved one with special medical needs…and disabilities can get paid to provide care.”6 Further, “As a caregiver for a parent, spouse, or child with special needs, you may need help.”7 There are government programs designed to help compensate the person caring for, loving, a disabled person. The reason for DI is not only the insured’s love for family, but to find funds to reward the selfless, sacrificial love the caregiver has for the disabled insured.
  • Why do people buy life insurance? According to the Insurance Regulatory and Development Authority of India (IRDAI), which is an autonomous body set up under the IRDA Act, 1999: “Anyone who has a family to support” needs life insurance. “When human life is lost or a person is disabled permanently or temporarily, there is loss of income to the household.”8 To support someone is to demonstrate love.
  • Why do people save money for their children’s college expenses? According to the Office of the State Treasurer of South Carolina, “Future Scholar (529 plan) has helped South Carolina families reach their financial educational goals for their children. Our highly rated 529 college savings program continues to provide numerous benefits such as tax advantages, investment options and flexibility of use that enable families to save for their loved ones’ future.”9
  • Why do people set money aside for retirement? According to the Social Security Administration’s Department of Research, Statistics & Policy Analysis, “Significant differences exist in retirement savings outcomes by marital status at young adulthood. For example, higher proportions of married young women (aged 22 to 35) were in households reporting retirement as an important savings goal compared to single and cohabiting women. Married women and men were significantly more likely to have an individual retirement account (IRA) or a defined contribution (DC) pension plan in their household at young adulthood than were their cohabiting and single counterparts.”10 But why should marriage be positively linked to retirement savings at young adulthood? The answer:
    • “From a psychological perspective, the long-term commitment implied by marriage may allow young adults to envision their old age and retirement needs more readily.
    • Marriage may also encourage young adults to feel more connected to their future selves, leading to more future-focused behavior.”11

Point: In our closest relationships we enjoy the holiness that is love. The independent financial service industry exists and is set apart from all other industries to serve people who are organized in families to fulfill their desire to protect and provide for their loved ones.

Truths about Families Can Be Extrapolated to Governments
The astute reader will have perhaps taken note of the fact that in each instance above, the source citing love as the reason for why people take financial actions is a government entity. Why would governments be inclined to weigh in on subjects related to financial services? Could it be that the needs within a family are congruent with the needs of a people, nation, or society?

“The success or failure of any government in the final analysis must be measured by the well-being of its citizens.”12

Consider the U.S. Constitution’s Preamble: ‘‘We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.’’

  1. Union: Sound financial preparation and planning helps keep families and loved ones united.
  2. Justice: Through estate and financial planning every member of a family can be treated justly.
  3. Insure Domestic Tranquility: Can it be any clearer than the words “insure” and “domestic?” Proper planning in financial areas helps maintain the peace among loved ones within families.
  4. Common Defense: Why do we recommend periodic review of beneficiary designations? Why do we urge people to have a Will? Why do we promote the use of trusts, LLCs, and other legal constructions? To defend their loved ones from creditors and others. Why do people purchase liability insurance for actions related to driving, home ownership, boating, etc.? To defend their loved ones from the financial liabilities arising from negligence.
  5. General Welfare: Financial services exists to help people provide for the welfare of their loved ones now and in the future.
  6. Blessings of Liberty: Liberty is about the freedom to choose. The fact is, life insurance, disability income insurance, long term care insurance, retirement savings, and college savings are vehicles for providing our loved ones with choices in the future.

The independent financial services sector is not only impacting families and individuals, but whole societies.

Does it not seem altogether appropriate that governments have generally given tax advantages to the products offered in independent financial services?

Application
All of us in independent financial services have the opportunity to create and distribute products that are uniquely set apart, and that gain their holiness from the act of serving the objective of love enacted.

Caveats: Being holy is not easy. Love is not easy.

Fyodor Dostoevsky, in his profound novel, The Brothers Karamazov, wrote, “Love in action is a harsh and dreadful thing compared to love in dreams.”

Evelyn Waugh, in his novel, Brideshead Revisited, wrote, “No one is ever holy without suffering.”

A.W. Tozer, in The Knowledge of the Holy, wrote, “Faith is an organ of knowledge and love an organ of experience.”

Question: Wait, to build my individual financial services practice, to serve as a successful wholesaler, or to perform my home office job effectively, I need to be willing to embrace harsh and dreadful things, suffering, and difficult experiences?

Yes. But it is not as scary as it sounds.

Practical Tips:

  • Spend the right amount of time. The job in financial services is never just to complete a task. It is always to make someone’s life better. Even if we feel like we completed the task at hand, we keep investing the time necessary to make sure the client or customer knows they have been seen and heard and that their love will be actuated.
  • Accept people for who they are. Each person is motivated to demonstrate love for family and others in an individualistic way. While we can make suggestions based on what we have seen other people do, we must have the humility not to prescribe. Instead, we describe, then inscribe.
  • Appreciate people for what they do. In independent financial services we celebrate every time a person decides a course of action, establishes a plan, and sets in motion something that will insure to the benefit of the people they love. The best thing we can do is make that celebration palpable. Tangible.
  • Step into hard. Where there are humans, there is suffering. And difficulties. Never anticipate how someone feels about something involving their families and loved ones. Lean in and learn. Broken relationships abound. This does not excuse us from working harder to find the right solutions and properly tailoring recommendations and approaches. For where there is suffering, there’s an opportunity for us to create set-apart services based on love.
  • Practice patience. There are certain people we actually prefer not to work with. It is admittedly hard to work with someone who sees life through an entirely different ideological lens than ours. We all know the command to love our neighbor like ourselves. Should we only do the “set apart” thing when we feel like it? C.S. Lewis wrote, “Do not waste time bothering whether you ‘love’ your neighbor; act as if you did.”13 We need to have the flexibility to work with people who feel differently about vaccinations, mask wearing, and the best approaches to resolving poverty, equality, immigration, illegal drugs, improving education, etc.
  • Expect nothing in return. In their amazing modern parable, The Go-Giver, Bob Burg and John David Mann wrote, “Your true worth is determined by how much more you give in value than you take in payment.”14 In independent financial services we seek to serve as many people as we can, and sometimes get paid.

Summary
We must embrace our roles in independent financial services as people who provide something set apart for a specific purpose. The one thing that defines our efforts as holy is our ability to help people actuate their love for others in practical ways. The independent financial service industry exists to serve people organized in families and help them achieve their desire to protect and provide for their loved ones.

Truly, no other industry is similarly set apart for this distinct purpose.
One way we can encourage one another to have this proper focus is to revise how we celebrate career accomplishments. Maybe instead of saying “Congratulations!” when someone is the top producer, earns the “Wholesaler of the Year” award, or when the carrier reaches its sales targets, we could exclaim…

“May it be holy!”

Footnotes:

  1. Ancient Hebrew Lexicon, vituralbookword.com publishing, Jeff Benner.
  2. “Two Gentlemen of Verona” (Act 3: scene 2) William Shakespeare.
  3. “All’s Well That Ends Well,” a play by Thomas Middleton and William Shakespeare, published in the First Folio in 1623.
  4. “Gilead,” by Marilynne Robinson (Farrar) The 2005 Pulitzer Prize Winner in Fiction.
  5. “What Is Long-Term Care?,” found here: https://www.nia.nih.gov/health/what-long-term-care.
  6. “Help and Support for Caregivers,” https://www.usa.gov/disability-caregiver.
  7. Ibid.
  8. “Why Buy Life Insurance?” https://www.policyholder.gov.in/why_buy_life_insurance.aspx.
  9. https://futurescholar.com/ and https://treasurer.sc.gov/what-we-do/for-citizens/college-savings-programs/.
  10. https://www.ssa.gov/policy/docs/research-summaries/marital-status.html.
  11. Ibid.
  12. https://www.ncbi.nlm.nih.gov/books/NBK221231/.
  13. “Mere Christianity,” C.S. Lewis, Geoffrey Bles (UK), Macmillan Publishers, HarperCollins Publishers (US) 1952.
  14. “The Go-Giver,” Bob Burg and John David Mann, Penguin Random House UK, 2007.

What If

The financial services industry is often focused on helping people to both get more and keep more. Our mission is aligned with helping people achieve their dreams. We also help people prove their love by providing for, and protecting, their families.

What if we all improved our ability to help people prove their love by giving more?

Amy Carmichael was born in Ireland in 1867. She served as a missionary to India where she rescued young girls and women from temple prostitution (which was basically a form of sex-trafficking). She gave her life to save the lives of others.

Carmichael wrote a book about love entitled “If.”1 Here is a quote from that book:
“You can give without loving, but you cannot love without giving.”

Grandparents
A good starting point for our industry is helping grandparents prove their love for their grandchildren by making wise and appropriate gifts.

My wife and I had a marvelous October 2021! We welcomed two new grandchildren into the world! Daniel was born on October 10 and Wendy was born on October 31. They bring our total number of living grandchildren to 6! (Sadly, we lost one.)

Like many of our similarly aged friends, we adore our grandchildren! Recently, we have been pondering the best ways to demonstrate this love.

Gifting
Perhaps the most straightforward way to demonstrate our love is to give each grandchild an outright gift of money. We could individually gift each grandchild up to $15,000 in 2021 without having to file a gift tax return. Since we are married, we could both make cash gifts to all six grandchildren ($180,000) with no gift tax implications! (Okay, we love them, but let’s not go crazy!)

We would want their parents to set this money aside on behalf of our grandchildren for future educational expenses, medical costs, or a down-payment on their first car or house. But there is no guarantee that our wishes will be respected.

Thankfully, there are multiple other strategies we can employ:

  • Contribute to a 529 college savings plan.
  • Give money from a donor-advised fund.
  • Set up Uniform Transfer to Minor Act (UTMA) accounts.
  • Establish a Delaware dynasty trust.
  • Buy some shares of stock that can grow over the long term.
  • Name them as beneficiaries in our will or trust.
  • Make contributions to Individual Retirement Accounts (IRAs).
  • Purchase an individual permanent life insurance policy on each child.

529 Plan
If we want to designate our gift for post-secondary education, a 529 account is a great tax-advantaged way to do it. We just need to be careful in choosing who owns the account because that will affect who can make decisions on the account, take disbursements, or change the beneficiary.

Donor-Advised Fund
Many brokerage firms and banks offer donor-advised funds. We could use these funds to teach our grandchildren about philanthropy and establish the means of giving them a share of the money to designate to charities of their choice. We simply need to notify the institution of the money within the fund that our grandchildren can grant to the charity of their choice.

UTMA Account
We can open UTMA accounts in the name of a grandchild, but an adult (their parents) will keep control of the account until the child reaches age 18-21 (depending on what state they’re living in). The money in these accounts could be used on anything the grandchild needs.

Delaware Dynasty Trust
A Delaware dynasty trust can allow us to financially benefit multiple generations! We could fund the trust with an amount up to the maximum available generation-skipping transfer (GST) tax exemption. The trust assets can pass from generation to generation, free of estate or GST tax.

Shares of Stock
We can buy our grandchildren some shares of stock that can grow over the long term. Of course, the downside of giving shares of stock in some companies is the risk that the company may not thrive over the long term. As an alternative, we could buy shares in exchange-traded funds or mutual funds. In this way we could teach them valuable lessons about investing.

Named Beneficiaries
By naming our grandchildren as beneficiaries in our will or trust we (as the grantors or trustors) are able to specify a set amount of money or a percentage of our total accounts as we desire each child to have. However, if our grandchildren are minors at the time of our deaths, the trustee or executor of our estate will face the responsibility of creating safeguards before the inheritance can be distributed.

Individual Retirement Account
Once the grandchildren are working, we can contribute to IRAs for each child. This includes both traditional and Roth IRAs. Each year we can contribute as much as they earn. In 2021, up to $6,000.

Life Insurance
If we bought a cash value life insurance policy on each child these policies could provide minimum financial protection now. In addition, the policy can be structured to give the child options in the future to purchase additional amounts without underwriting when there’s a greater need for additional coverage. These policies will build cash value that our grandchildren could access for any reason.

Question: As an independent financial professional, are you guiding your clients who are grandparents in these various approaches to gifting?

No Good Deed Goes Unpunished
Before recommending any of these ideas to grandparents, we will do well to remember several things:

  • Remember that any gift can interfere with Medicaid eligibility. “Under federal Medicaid law, if you transfer certain assets within five years before applying for Medicaid, you will be ineligible for a period of time (called a transfer penalty), depending on how much money you transferred. Even small transfers can affect eligibility. While federal law allows individuals to gift up to $15,000 per year (in 2021) without having to pay a gift tax, Medicaid law still treats that gift as a transfer.”2
  • Keep in mind that today’s tax-free transfer amount is set to expire after 2025. That means it is possible that the amount your clients who are grandparents can transfer free of estate tax to their grandchildren may be lower in the future.
  • There is a downside for grandparents gifting assets during their lifetime to their grandchildren. Under 2021 tax law, stocks and other assets that appreciate in value will not receive a “step-up” income tax basis. This means that grandchildren who receive gifts of appreciated property or securities will be subject to capital gains tax on the built-in appreciation when they sell the assets.
  • Wise grandparents will ask their children for permission before they make large or numerous gifts for their grandchildren. Parents can feel disappointed and embarrassed rather than joyful whenever they feel a sizable gift from the grandparents eclipses anything they themselves can give their own children. Grandparents should always honor the parents by giving a gift they approve of.
  • While grandparents may desire to leave their grandchildren with an awesome inheritance, giving large sums of money or assets may not be appreciated by the parents. Some parents may see such large inheritances as a hindrance to their child’s character development.

Like everything else within the realm of financial services, there is greater complexity than the general public can comprehend. Even when it comes to simply wanting to demonstrate love through giving, there are good, better, and best ideas, and there are also bad, worse, and potentially disastrous consequences.

What if we as independent financial professionals elevated our own skills in the art and science of gifting? We would then be in better shape for coaching our grandparent clients!

Then we, too, could show our love by giving (sound advice).

References:
1. “If”, by Amy Carmichael, 1965, Zondervan, Grand Rapids, Mich.
2. https://www.elderlawanswers.com/how-gifts-can-affect-medicaid-eligibility-10006.

The Dangers Of Money

0

Maybe you have heard this story before.

A husband and wife who went shopping together. The husband wandered off, so his wife texted him and asked where he was.

He hates to text, so he called her.

“Remember that jewelry store we went to 10 years ago?” the husband asked. “You saw that beautiful diamond necklace, and I said that I couldn’t afford it then, but one day when I had a little more money, I would buy it for you.”

“Yes, I remember,” his wife said, trying to catch her breath.

“Well, I’m at the donut store next door to it.”

Money can potentially accentuate romance! (Or it can cause hurt and division.)

Point: Essentially neutral, money can often be dangerous.

At the start of a New Year, we can take a fresh look at the influence money has in our lives, and if needed, make decisions to change how we personally view money. As independent financial professionals we can also re-evaluate how we advise others regarding money.

Bottom line: We should urge people to be in charge of their money, and not the other way round.

The Dangers of Money
The Harvard Study of Adult Development conducted what may be the longest study of adult life that’s ever been done. For more than 80 years, they tracked the lives of 724 men, year after year, asking about their work, their home lives, and their health. As of 2015 psychiatrist Robert Waldinger was the director of the study. In a November 2015 TED talk (with over 40 million views) he summarized the findings: “Good relationships keep us happier and healthier. Period.”1

As independent financial professionals, we want nothing more for our clients than happy, healthy lives. What impact does money have, first on relationships, and subsequently on health and happiness?

In a 2015 report entitled “Paying with Our Health,” published by the American Psychological Association, the contributors summarized their discoveries: “Stress about money and finances appears to have a significant impact on Americans’ lives. Nearly three quarters (72 percent) of the adults surveyed report feeling stressed about money at least some of the time and 22 percent rate their stress about money during the past month as an eight, nine or 10 (on a 10-point scale).”2

Money-related stress impacts important relationships. From the same study:

“For those Americans who feel the burden of stress about money the most—parents, younger generations, lower income households and women—it seems that emotional support is even harder to come by. Even within families, talking about money and finances can be challenging. Only 37 percent say they talk with their family members about money often and 31 percent of spouses and partners say that money is a major source of conflict or tension in their relationship.”3

Another study published in 2018 made this observation: “One in five (19 percent) Americans said they have financial disagreements with their significant other at least monthly.”4

Problem: Good relationships keep us happier and healthier, but the burden of stress about money negatively impacts our closest relationships.

Money and Relationships
Amanda Clayman is a financial therapist who counsels individuals and couples about their issues involving money. She says, “Money issues are never just about money.”5

What is behind the conflicts that couples and families experience regarding money?

  1. Money can create a false sense of independence. People who are extremely affluent may conclude that they can spend their way into or out of just about anything, including relationships. This has a deleterious effect on long term commitments.
  2. Money in abundance can lead to a sense of superiority. People with money often look down on those without. One spouse who earns a significantly higher income can treat the other spouse as inferior. Financial success can lead to pride and prejudice.
  3. Money that is easily accessible can lead to weakened resolve. Desirable things seem more affordable. The downside of a poor financial choice begins to lose power. Author and speaker Paul David Tripp wrote: “Money can be dangerous because it removes a restraint—affordability.”6
  4. More money does not necessarily make a person more generous. When a person’s income translates into a high hourly wage, even the generous gift of time becomes a scarce commodity. Relationships require time to be built and strengthened.
  5. Money shortage creates heightened scrutiny. Suddenly, each spouse is under the watchful eye of the other. How children spend money, and on what, becomes a bigger issue. Money scarcity can cause people to judge one another’s decisions and choices.
  6. Debt and financial encumbrance looms over everything. Even times of celebration (birthdays, holiday gift-giving, anniversaries, etc.) can be despoiled by the oppression of debt. The scarcity mindset can impact whether the important people in our lives feel appreciated.
  7. Comparing one’s assets and money to the holdings of others is rarely a good thing. Comparing leads to competing which leads to complaining. Friendships can dissolve under the weight of envy.
  8. Financial comfort often reduces a person’s empathy toward the less fortunate. The idea comes to mind that one’s financial success was a result of our own hard work, so others just need to do the same. Our lives are the cumulative effect of deposits other people made in us. We are rarely self-made. The reality is that we determined neither our own genes nor our circumstances. Riches and humility are often inversely proportional.

Bottom line: Money can change the way we think about ourselves (and others).

What Is an Independent Financial Professional to Do?
Once we recognize the dangers of money (in particular, the deleterious effect money can have on relationships) what then are we to do?

Suggestions:

  • Every recommendation we make has implications for the client’s relationships. In addition to discussing risk/reward, opportunity cost, asset allocation, tax benefits, and the like, we need to also urge the client to consider the relational ramifications. Who might be impacted? How will successful implementation impact others who are depending on the client? How might the client’s financial success lead to greater generosity?
  • In giving financial advice we inherently bear the responsibility to consider the total impact on our client’s human flourishing—to which relationships are integral. There ought to be a “who” behind the “why.”
  • Telling stories is how we change thinking. More than facts, better than trend analysis, above logical presentations, our ability to share stories will inspire people to make behavioral changes. In our practices we have seen money both build and destroy close relationships. Without sharing names, we can use these experiences to add greater impact to the recommendations we may make.

Caveat: Independent financial professionals today operate in an environment of moral relativism. Caution should be used when adding relational guidance to financial advice. It is best not to categorize possible issues involved in financial matters by using terms like “greed,” “stinginess,” “selfishness,” or “prideful superiority.” Instead, it is better to state everything in positive terms.

Ask questions, like these:

  1. “What beneficial impact might this action have on the people nearest to you?”
  2. “Who beyond your own family might be positively impacted by this potential success?”
  3. “Are we considering all the ways this might strengthen your closest relationships?”
  4. “Do these steps lead you to greater opportunities for you to generously impact the people in your life?”
  5. “When the proposed financial outcomes occur, will you be freer to invest in other people’s lives?”

Summary
Money can change the way we think about ourselves—and others. Independent financial professionals serve their clients best when they remember that relationships are key to full and healthy lives.

Tom Ferry is founder and CEO of Ferry International, one of the real estate industry’s leading coaching and training companies. He exemplifies the art of blending relationship-mindedness with business and financial success.

Tom shared his story: “When the market crashed from 2007 to 2009, I focused on how to serve clients in this new reality. I adapted to market conditions. I doubled down on the business of helping clients (realtors) manage this transition in their own business. I helped them go from a traditional retail business (listing and sales) to a diversified approach where they worked with banks to sell bank-owned homes, distressed assets, and short sales. Because this encompassed a significant number of homes sold during the crisis, the business survived.”7

This is the key: “I went all in on giving back and adapting to tough times, creating more relationships and bringing more value. That made all the difference in my business.”8

We can excel in our work as independent financial professionals by helping our clients to give back, create more relationships, and bring more value to the people in their lives.

Who knows, but maybe how we and our clients use money in this life may have implications for the life to come.

One spiritual leader said this:

“I tell you, use worldly wealth to gain friends for yourselves, so that when it is gone, you will be welcomed into eternal dwellings.”9

Footnotes:

  1. https://www.ted.com/talks/robert_waldinger_what_makes_a_good_life_lessons_from_the_longest_study_on_happiness/transcript?language=en#t-8118.
  2. https://www.apa.org/news/press/releases/stress/2014/stress-report.pdf.
  3. Ibid.
  4. Northwestern Mutual. “Planning and Progress Study 2018.” https://news.northwesternmutual.com/planning-and-progress-2018.
  5. https://www.npr.org/2021/08/16/1028081097/money-financial-intimacy-talk-relationship-advice.
  6. http://www.paultripp.com/wednesdays-word?beid=206307.
  7. http://entm.ag/vw6.
  8. Ibid.
  9. https://www.biblegateway.com/passage/?search=Luke+16%3A9&version=NIV.

Re-Introducing Simplicity

“Simplicity is the ultimate sophistication.” —Leonardo da Vinci

Sometimes I miss simple.

Analogue clocks are simple. Every now and then the power goes out to our house. We walk into the kitchen and find flashing blue lights in the displays on the oven and the microwave. These digital timekeepers need to be reset. Meanwhile, on the wall and on the fireplace mantle, our analogue clocks are quietly, reliably, keeping time. Simply.

We own two refrigerators. They have the convenience of ice makers as well as water dispensers. When you want ice, you choose either crushed or cubed. If you select crushed be prepared to hear the sound of semi-trucks driving over gravel. If you choose cubed, the glass in your hand will catch about 80% of them. The rest will find hiding places with remarkable speed. In order to save yourself the inconvenience of opening the freezer door, you must accept either being frightened out of your socks by harsh, grinding noise, or spending a few minutes on your knees tracking down scattered ice.

I miss ice cube trays. We had aluminum trays growing up. A little lever cracked them all at once into free-standing cubes. Choose as many as you want, and then either put more water into the tray, or return it back to the freezer. Simple.

Placing Value on Simplicity in Financial Services

Satisfaction and Complexity Are Inversely Related

The beauty of Independent Financial Services rests in alternatives. Choices. The word “independence” reflects the freedom to recommend proposed solutions from among a large number of products, services, providers, or vendors.

Question: Is it possible to make decision-making more difficult than it needs to be by offering too many alternatives?

Psychologist Barry Schwartz, in his 2005 TED Talk,1 discussed the disadvantages of having too many alternatives.

According to Schwartz, too many choices can have negative effects on people:

  • Rather than being liberating, it produces paralysis. “With so many options to choose from, people find it very difficult to choose at all.”
  • “The second effect is that, even if we manage to overcome the paralysis and make a choice, we end up less satisfied with the result of the choice than we would be if we had fewer options to choose from. It’s easy to imagine that you could’ve made a different choice that would’ve been better. And what happens is, this imagined alternative induces you to regret the decision you made, and this regret subtracts from the satisfaction you get out of the decision you made, even if it was a good decision. The more options there are, the easier it is to regret anything at all that is disappointing about the option that you chose.”
  • Escalation of expectations. “Adding options to people’s lives can’t help but increase the expectations people have about how good those options will be. And what that’s going to produce is less satisfaction with results, even when they’re good results.”

Question: In your interactions with your customers, are you inadvertently reducing their satisfaction in your services by offering them too many options?

Working in Opposition to Human Behavior
At the heart of Independent Financial Services is the human heart. And brain. We seek to tap into human relationships and the hunger for human flourishing.

Yet, we often work in an opposite direction to how human beings operate.

According to Christopher Ingraham in an April 2021 article2 in The Washington Post, human beings “tend to solve problems by adding things together rather than taking things away, even when doing so goes against our best interests.”

In our logical minds, the numerical concepts of “more” and “higher” equate to evaluative concepts of “positive” and “better.” We know, pragmatically, that “more” does not automatically equal “better” because we all have suffered from overburdened schedules, too many regulations, and being too short for our weight.

As humans faced with multiple options to solve a problem, we tend to choose the most complex solution. In psychology, this is known as the “complexity bias.” This may be explained as a means of feeding our egos. We feel like we have authority on a topic when we use complex jargon. The more complex and busy our schedules and routines, the more likely we are to feel like we’re doing life right.

The Cambridge Dictionary defines complexity as “the state of having many parts and being difficult to understand or find an answer to.” The definition of simplicity is the inverse: “something [that] is easy to understand or do.”

When people think something is harder than it is, they often surrender their responsibility to understand it. This is the eye-glazing reaction we get as soon as we discuss something like indexed universal life. To resist taking responsibility for deciding, people will procrastinate or reject things when they do not understand.

Complexity bias also describes our tendency to look at something that is easy to understand and view it as having elements that are difficult to understand.

Imagine someone who is successful, makes a significant income, owns property, and seems intelligent. This same person may not have a Will. A Will represents multiple decisions, several individual steps that are out of the ordinary, and even requires awkward conversations. None of these in themselves are hard but, together, they make it difficult to know how to get started.

Anything that has the word “insurance” in its name strikes many people as overly complex. Health Insurance. Life Insurance. Long Term Care Insurance. Disability Insurance. I have witnessed engineers, PhDs, computer scientists and other highly intelligent men and women struggle with the idea of looking at options for their insurance needs.

Edsger Wybe Dijkstra was a Dutch computer scientist, programmer, software engineer, systems scientist, science essayist, and pioneer in computing science. He said some remarkably pithy things, including:

  • “Computer science is no more about computers than astronomy is about telescopes.”
  • “The question of whether a computer can think is no more interesting than the question of whether a submarine can swim.”

But my favorite of his quotes is this: “Simplicity is a great virtue, but it requires hard work to achieve it and education to appreciate it. And to make matters worse: complexity sells better.”

Questions:

  • In our interactions with our customers, are we creating greater than necessary complexity simply because it prevents people from taking responsibility to understand?
  • Do we innately act on the impulse that complexity sells better?
  • Are we resisting doing the hard work required to make things simpler?
  • Do we believe our customers do not have the education required to grasp the wisdom of simple?

Making Simplicity the Objective
Confucius said, “Life is really simple, but we insist on making it complicated.”
What if all of us in Independent Financial Services took an oath to resist the temptation to make everything complicated?

Maybe you have heard of something called “Occam’s razor.” This is a principle used by scientists when looking at possible causation. It is defined as, “Among competing hypotheses, the one with the fewest assumptions should be selected.” Or, more simply, Occam’s razor states that the simplest explanation is preferable to one that is more complex.

If we want to change people’s circumstances, move them from indecisive to decisive, from uninsured to insured, from unprepared to prepared, we need to deploy simpler explanations.

Anyone who has read Atomic Habits by James Clear knows that our brains are wired to take the path of least resistance, the path that requires the least amount of energy. It is the basis of why we form habits. If a person repeats the same action on a regular basis in response to the same cue and reward, it will become a habit as the corresponding neural pathway is formed. From then on, their brain will use less energy to complete the same action.

Habit-forming behavior follows the principle of Occam’s razor.

Personal Experiences:
As an Independent Financial Professional I have done the right things poorly, the wrong things well, and the so-so things in a mediocre fashion. On occasion, I did the right thing well. Examples:

  • I sold 20-year level term to someone paralyzed by indecision between universal life and whole life. The widow was pleased to receive the death proceeds.
  • I urged people to save, then invest. That served a young couple who had received a large inheritance only months before Black Monday (October 19, 1987) when America experienced a sudden, severe, and largely unexpected stock market crash. They were anxious to invest but had little in savings. I urged patience and caution. They were grateful.
  • When two business partners were delaying the funding of their buy-sell agreement because another agent promoted an expensive permanent policy, I urged them to buy term now, just in case. Just in time, it turned out.
  • When coaching a brokerage general agency how to sell more life insurance, they wanted me to devise multiple marketing plans to get their property and casualty agents to sell life insurance. Instead, I directed them away from their P&C agents and helped them find just 10 life insurance agents. They tripled their sales.

Action Steps:
Consider forming these habits to make your work simpler for you and easier for your customers:

  1. Rather than proposing a complex investment strategy that has two dozen mutual funds for example, which will only make it hard for a client to understand what is going on in the account, form instead the habit of recommending an investment strategy with fewer holdings. A simpler approach is capable of accomplishing the same objectives as the more complicated portfolio, but in a much more efficient, low-cost way. The simpler strategy may not seem as exciting or exotic, but it will likely reach the same goals at a lower cost.
  2. Quit explaining how something works, and focus on why the product or approach fits the needs. Replace the perceived need to make technicians of everyone and choose to empower everyone with the information that will drive action.
  3. Form the habit of proposing simpler solutions. Present shorter proposals. Create written plans on one page. Simple plans and solutions are easier to understand, implement, and maintain. The goal should always be to give the customer the ability to act. A simple plan can include the vital information, strategies, and decisions, and possibly place your customer on the path of, and in the direction of, actionable simplicity.
  4. Create a strategy of introducing greater complexity only in parallel to the demand for it in your customers’ lives. People actually have less of a need to know than they do a push to act.

Conclusion
Due to the human tendency toward complexity bias, we need to rethink how we propose solutions, and consider reducing the variety, number, and complexity of alternatives.
We are at our best when our customers are surprised by the experience of surpassed expectations.

We can be tempted to present solutions riddled with complexity and simultaneously prohibit our customers from both understanding and acting. Or we can follow the reasoning of Occam’s razor and present simpler solutions.

As an industry we are infatuated with complexity. Maybe back in the day things were simpler, but also, perhaps, worse in some ways.

Psychologist Barry Schwartz: “The reason that everything was better back when everything was worse is that when everything was worse, it was actually possible for people to have experiences that were a pleasant surprise.”3

Is it time to begin giving your customers a pleasant surprise?

Footnotes:

  1. https://www.ted.com/talks.barry_schwartz_the_paradox_of_choice.
  2. https://www.washingtonpost.com.business/2021/04/16/bias-problem-solving-nature.
  3. https://www.ted.com/talks/barry_schwartz_the_paradox_of_choice.

On The Right Path

My career began in retail sales. My official title was Sales Representative. I represented the products of one carrier. The company assigned me the task of completing the Project 100. This was an opportunity to define my natural market. The idea was to record the names of family, friends, neighbors, teammates, fellow church attendees, and other people I happened to know. The expectation was that I would list 100 names. The problem? I started selling in a city I had never lived in before and where, other than my in-laws, I knew literally no one. My natural market turned out to be total strangers!

Thank heavens for orphan policyholders! My company provided me with a thick pile of orphan policy cards, small pieces of paper with the information related to a policyholder. It listed the policyholder’s name, address, policy number, policy type, issue date, premium, and premium mode of a policy written by an inactive agent. All I had to do was look up the names in the phone book (remember those?) and call them.

In addition, my company sold property and casualty as well as life and annuities. Their advice to me was, “Use the Criss Cross City Directory to look up the phone numbers for people living in good neighborhoods. Call them and ask when they had moved into their house—specifically, which month. That is roughly the anniversary of their homeowners insurance policy. Tell them you will contact them thirty days before the next anniversary in order to provide a competitive quote.” This process was called “X-Dating.” (Looking for the expiration date of the annual homeowners policy.)

My wife and I got married two weeks before I entered life insurance sales. She got used to me making X-Dating calls and orphan policyholder calls.

Interesting Start

  • My very first day, the sales manager who hired me was promptly fired.
  • That same day, the regional VP who prompted the former’s departure also fired another agent who he saw “windowing.” (This, I later learned from another experienced agent, was the technique of holding a form up to the window so as to trace the signature onto a part of the application that the agent had forgotten to have the applicant sign.)
  • My very first week I sold a policy on the second of several scheduled appointments! The sale would earn a commission of roughly $1,000! I promptly postponed the rest of the week’s appointments to the next week based on the rationale that at age 23, I did not need to be greedy. I mean, $50,000 per year was all that someone like me needed. Well, both my district manager and my wife strongly disagreed with this decision.
  • I sold a policy to a wife of a police officer worried that her husband would be killed in the line of duty. He returned home just as I was leaving. I met him standing beside my car on their driveway. He was in the process of writing me a ticket for expired license tags. The fine for the ticket exactly equaled the commission I had earned on the term life insurance policy I had written.
  • Before selling life insurance I never before had a use for a briefcase. My wife helped me pick out a brown one with a leather handle and a hard case. Excitement built as I stuffed its pockets full of my business cards, brochures on whole life, blank applications, and all the other necessary forms. On the first appointment with my new briefcase I placed it on the floor beside my chair as I met with a young mom who owned a life insurance policy on her life purchased by her parents. As I enthusiastically explained the advantages of replacing her old type of policy with the sparkling new whole life products we were selling then, I suddenly became aware of a scratching noise. Looking down I saw her cat step out of the briefcase and immediately noticed the moist, stained piece of paper now covering the cat’s deposit.
  • As it turned out, life insurance was very much in the news in my new community. Apparently, a small group of agents for another carrier decided to forego sending their clients’ applications to the insurance company for underwriting and processing. Instead, these enterprising agents simply printed their own policies and collected the premiums using checks made out to themselves. Actually, this had worked well for them for the previous four years. Then someone died. The newspaper headline proclaimed, “Scam Committed by Local Life Insurance Agents.” The fallout for me was that every person I met wanted proof that I was, in fact, a legitimate agent.
  • My company had a marketing tool available to me. I could send letters offering prospects a free road atlas (young people, ask someone older what these were). At the bottom of the letter it read, “No agent will call.” Well, when people ordered these atlases, I promptly delivered them in person. When they would object, and point to the letter stating, “no agent will call,” I would offer the same rejoinder every time—“Maam (Sir), back in the office the other agents all took a vote. Turns out, they think I am the closest thing to ‘no agent’ that we have.” Usually, they would laugh and let me in.

The Sign I Was on My Right Path
My wife heard my X-Dating pitch dozens of times per day. Significant numbers of people were less than happy to share with me the month in which they bought their home. This was, they informed me, “None of your business.”

I canvassed the better neighborhoods and business parks letting people know what I did for a living and expressing confidence that I could surely help them. Here is how I described what I did: “I help the unprepared plan for the unexpected.” From the reactions I received, it was clear to me that most people were either already prepared, believed they had a plan, or had no idea what to expect.

Honestly, I began to question my career choice.

Until…

Marie owned a small whole life policy issued by my company years ago when she was pregnant with her first child. Now she was much older, her kids had grown and had their own families, and her husband Frank had advanced dementia. She explained why she had agreed to meet with me. “If something were to happen to me there needs to be money available to place Frank in a nursing home for his care.” The life insurance would be that source of funds.

I wrote an application for life insurance on Marie, it sailed through Underwriting, and I delivered her policy a flashing six weeks later. That was in July. I placed the file in my desk drawer and went about finding other people who needed the products I sold.

Then…

At 11:30 PM on the Friday before Labor Day, I was in bed sleeping next to my beautiful wife when the phone rang. We had a house phone (young people can look it up on Google) on the table next to the bed. I answered it in a fog.

“Hello?”

“Dave Murphy?”

“Yes.”

“This is Marie. Marie C____.”

“Who?”

“Marie. I live with my husband Frank. You sold me a Life Insurance policy about two months ago.”

“Yes. Okay.”

“I need your help. Frank somehow got out of the house. Maybe I had forgotten to lock the deadbolt. He’s gone, Dave.”

“Sorry to hear that, Marie. Truly. But why are you calling me? Did you seek help from your kids? Have you notified the police?”

“The kids won’t help. They want nothing to do with Frank. The police would only scare Frank.”

“Okay, but why me?”

“Dave, you listened to me. You helped me buy the policy that would take care of Frank. You are the only one I know who I can trust. I know you care.

“I am heading your way immediately, Marie. It will take me about fifteen minutes, maybe twenty.”

When I arrived, she asked me to drive her pick-up truck while she sat in the truck bed yelling his name. We drove all around, in concentric circles. Sometime near 2:00 AM we found him wandering down a dark street about four miles from her house. We gathered him into the passenger seat, Marie took over driving and I climbed into the truck bed. In short order he was safe at home in bed. Marie expressed immense gratitude.
I went home to my worried wife proudly bearing the knowledge that I was on the right path.

Signs that You Are on the Right Path
I read an article in “Forbes” that contained this paragraph:

“When you do something that makes you feel alive and connected to your purpose, you’ll think ‘I am on my path now!’ You feel like you’re doing exactly what you were meant to do.”1

As an independent financial professional, a brokerage general agent, a home office employee, or a wholesaler, you most likely already know if you are on the right path for you. If you are still wondering, here are some simple techniques for clarifying whether or not you are on your path.

Anticipation: If you wake up each day excited to see who you will meet or what the day will hold for you, you are probably in the right place. There will always be drudgery. Every position has responsibilities that are menial, repetitive, and sometimes even annoying. When these are offset by the adventure of seeing what comes next, you can persevere through the mundane. If each day feels to you like an unopened bag of snacks, and all you have to do to get enjoyment is to open it, you are on the right path.

Means, not Ends: People date other people in order to find someone to marry. People sometimes marry in order to have kids. People then want their kids to be raised so they can get their freedom back. Others work furiously so that they can retire early. In other words, people believe their fulfillment will happen someday later… after…eventually. The truth is, today is your present. A gift. To slide through the next twenty-four hours with eyes fixed on sometime later is to waste today. When you find that the work that you do, the people you meet, and the process of serving others is all the fulfillment you need then you know you have found your purpose. It is about the journey and not the destination.

Learning: When people stop being curious or give up pursuing knowledge of their work, industry, or how others in their field achieved great success, that is a sure sign they are no longer on the path. In financial services, the learning never stops. There is always an area of expertise that is waiting for exploration. If it has been a while since you learned anything new, maybe you are on the wrong path. (If you are reading this article, you are evidently still learning!)

Sharing: When we know we have something special, it is rare that we want to keep it for ourselves. (An exception might be your secret fishing spot!) A sure sign that you are where you need to be is the habit you have of sharing with others the things you are learning, doing, or the success you are having. Are you a mentor? Do you participate in a study group? Have you spoken to groups of people new to the industry? If you are doing these things, you are most certainly on the right path.

Summary
My purpose became clear the minute I heard Marie say, “You are the only one I know who I can trust. I know you care.”

To know that you are doing what you were meant to do is rewarding. Uncertainty regarding your purpose is debilitating. It is hard to dredge up energy for what is drudgery.

There is an ancient proverb that says, “Knowing what is right is like deep water in the heart; a wise person draws from the well within.”2

Nothing is better than knowing that you are on the right path, that you are constructively deploying your talents and experiences in the right way, and that you can see the impact you are having on the right people. I hope that describes you.

If it doesn’t, maybe you just need to draw more deeply from your well.

Footnotes:

  1. https://www.forbes.com/sites lizryan/2018/01/23/ten-signs-youre-on-your-path-and-ten-signs-youre-not/?sh=76ce3dd054b7.
  2. Proverbs 20:5, The Message.®

The Spectrum

This Summer my wife and I vacationed with dear friends in the mountains of North Carolina. Jon Kling started his life insurance and financial services career in 1972 with Equitable Life of New York. Jon was one of the first people to acquire his CFP® designation.1 He was Life and Qualifying Member of the MDRT® for many years.2 Jon and I met nearly 18 years ago and worked together for a few years. He is a wise, humble, gentle, and impactful contributor to our industry. In addition, he is a cherished friend.

Between the two of us we have something like 80 years of experience in the financial services industry. (But do not be impressed. I remember a dear friend telling me about serving in the nursery at church during the worship services: “We had 18 little people who had nearly 35 years of combined life experience, yet not one of them was potty trained!”)

While we were enjoying mountaintop views and great food, I took the opportunity to ask Jon some questions in order to capture some of his wisdom for the benefit of Broker World readers.

Me: What is your advice to independent financial professionals (IFPs) about the best thing to remember in regard to clients?

Jon: People don’t do things they don’t understand.

Me: Put meat on that. Take life insurance for example, how does an IFP best approach a client’s needs?

Jon: Life insurance falls into a broad category we call “Risk Management.” There are three components of risk and how we manage it. Risk can be reduced, avoided, or insured. To some extent, a person can control risk by altering habits or activities. What IFPs are concerned about is identifying risks that are economically devastating and very real, and in fact, inevitable. Before we can effectively discuss life insurance, we need the client to understand what risks they are comfortable accepting, avoiding, or insuring.

Me: Makes sense. What is a good way for IFPs to present the types of risks life insurance is designed to absorb?

Jon: Early in my career I created something I called “The Spectrum.” It is a way of presenting the spectrum of benefits that life insurance provides for the people who own it. Think of a vertical line…the beginning and the end. All the way to the left (low end of The Spectrum) is Final Expense. Somebody else paid their way into this world so they might as well pay their own way out. Final expenses could include medical expenses from a prolonged illness, legal and accounting fees, and income and estate taxes.

Some IFPs may choose to include Emergency Fund needs in addition to final expenses. Other IFPS present the client with suitable investments that can be earmarked as emergency savings.

Moving to the right we discuss Family Income. We cannot replace the breadwinner, but we can replace the stream of income she/he provides the family.

Next on The Spectrum is Mortgage and Debt cancellation. Life insurance is an excellent way of erasing consumer debt at the breadwinner’s death and providing the surviving family members with a place to live without a mortgage.

In the middle of The Spectrum is Education Expense. Life insurance is the best plan and only self-completing time installment for providing funds for post-secondary education expenses. I did not say the best investment. An IFP can show the client an attractive alternative through systematic investments deducted from current income and channeled into an Education Fund.

All the way to the right on The Spectrum is Retirement Income. At this point the wise IFP asks a series of questions designed to discover the client’s perspectives. These questions include:

  1. How will you maintain your lifestyle if you live into retirement years?
  2. How will your spouse live post-retirement if you predecease him/her?
  3. At what age do you anticipate becoming financially independent?
  4. Will the money you expect to accumulate by retirement age last as long as you might?
  5. What risks have you assumed in the vehicles that you are using for sending money ahead into your retirement years?

Me: Did you ever share “The Spectrum” with other IFPs?

Jon: Yes, in fact I was asked by my core carrier to share it with their other career agent offices. Not long ago I received an email from Keith, one of the agents I taught early in his career. He wrote, “Without ‘The Spectrum’ I would never have made it 38+ years selling intangibles.”

Me: That is awesome! Hey, what other examples of good questions should an IFP use with clients?

Jon: I like these:

  1. Do you know the difference between transition and transaction?
  2. Can you tell me where your pain is?
  3. What do you want to accomplish?
  4. Have you ever wondered why some people retire with adequate income sources while others still find it necessary to work post retirement?

Me: Help me understand the first question.

Jon: A client minded IFP does not approach a client with an intention of selling something. Rather, he/she wants to help clients transition from ill-prepared to prepared, from unprotected to protected, from directionless to operating with a plan. Client minded IFPs seek to manage productive transitions for their clients, and do not focus on creating transactions.

Me: Understood. How about the fourth question?

Jon: An IFP will encounter two types of people: ‘Today’ people and ‘Tomorrow’ people. Today people plan and act today. Tomorrow people talk about planning and may, or may not, ever act. My branch manager said, “Someone who doesn’t know where they are going or how they will get there is a wandering generality.” People who retire comfortably are Today people. They recognize the importance and exercise the urgency to act now for their own future benefit. The bottom line is that IFPs need to help clients build a strategy and a plan built around their most important concerns.

Me: That is a helpful framework. What other salient advice can you offer IFPs?

Jon: I urge IFPs to tell stories when presenting potential solutions to clients. These can be stories of people who suffered upsets yet were prepared, as well as stories about people who refused to plan or prepare and whose families or employees were negatively impacted. For example, I worked with a business owner who experienced a fire in his building but, since he had no insurance, when the building was completely ruined all 17 employees lost their jobs. One person’s refusal to act impacted many other people.

Me: Many communication experts tout stories as the essential key to persuasion. What else?

Jon: Remember that we insult the intelligence of other people when we present only one solution. Respect is based on giving people options along with our recommendations. Similarly, we treat people as naïve whenever we claim that something we are offering is either cheapest or best. What people want is that which is right for them. They want to know that their individual circumstances dictated the proposed solutions.

Me: Agreed! Trust follows respect.

Jon: Simply said, the wise IFPs will sell their clients what they ask for. (Later, the IFP can sell the client what is also truly needed.)

Me: What about the issue of earning commissions or receiving fee compensation?

Jon: When an IFP presents fees to a client as part of his/her compensation, the fee itself requires that there be a discussion of value. Something not embedded in a product’s pricing (like commissions), but is paid directly by the client, demands a presentation of the value the client will receive.

Me: How important is follow-up and annual reviews?

Jon: IFPs should ask their clients, “Are your priorities static or the same as five years ago? Have they changed over the years?” The point is everything changes. Fees include the expectation of follow-up and periodic reviews. I learned that personal contact, face-to-face, or over the phone, “touch” in other words, is how to keep exceeding client expectations. Simply acknowledging birthdays and anniversaries, scheduling periodic reviews, or having any contact with clients that does not cost them more money created advocates for my work.

Me: Is there an inverse relationship between frequency of sales and length of client relationship?

Jon: Perhaps there are fewer sales as the relationship grows. But there are more ways to receive payment other than through fees or commissions. Receiving referrals is a form of payment. Brand new prospects with no connections to existing clients are harder to turn into clients. Referrals require less trust-building.

Me: One last question. As artificial intelligence expands into the financial services industry, will the IFP be eventually replaced by phones and devices?

Jon: To an extent, certainly. Anything strictly transactional is subject to being replaced by automation. In financial services, however, there remains the necessity of adding understanding to information. We want our clients to make an educated decision rather than an emotional one. Anyone today can learn all about life insurance using their phone, and discover the different product types, research the cost, compare product pricing, get quotes, and even apply online for a life insurance policy without the aid of an IFP. Stock trades can easily be done without an advisor. However, when it comes to understanding the proven techniques for applying financial principles to the vicissitudes of life, it is a rare person indeed who can navigate their way through the myriad insurance and investment opportunities without the assistance of someone who knows how.

It all comes down to the target of our attention, the object of our focus. In a letter written by the founder of an organization to its leaders, someone once wrote, “Let each of you look not only to his own interests, but also to the interests of others.”3 The successful IFP will make the clients’ interests first priority before considering how much the interaction will create in terms of income. Long-term relationships built on trust, mutual respect, and honest conversation will generate a lifetime of income for the client minded IFP.

Thank you, Jon Kling, my friend.

Footnotes:

  1. Certified Financial Planner Board of Standards, Inc. (CFP Board) owns a family of certification marks, including, without limitation, CFP®.
  2. A Registered Mark of Million Dollar Round Table®.
  3. https://www.biblegateway.com/passage/?search=Philippians+2%3A4&version=ESV.

The Power Of A Public Good

“People will pay you a lot of money if you pretend to know how the tax code works.”—Adele Valenzuela, CPA, a partner at AVM DeMars CPAs in Williston Park, NY.

It is easy to forget that America was founded, in part, to avoid high taxation.

The CCH Standard Federal Tax Reporter includes the Internal Revenue Code (IRC), IRS regulations, the revenue rulings, and case law covering court proceedings that involve the tax code. Combined, these documents add up to about 70,000 pages. The IRC itself is around 2,600 pages.

From time to time politicians promise to simplify the tax code. They promise to reduce the number of pages. At no point in history has the size of the Tax Reporter shrunk. In fact, the rate of increase actually grew after the 1986 tax and subsequent simplification reforms. This makes sense because the Tax Reporter includes all past tax statutes and all case law. So even if Congress enacts a new one-page statutory tax code, the Tax Reporter would keep growing as more and more cases hit the courts.

A Little History
The United States Constitution gives Congress the power to “Lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.” (Article I, Section 8)

The Federal Government first levied a federal income tax during the Civil War. Congress rightly deduced that it was going to be a long, costly war, and the government needed revenue. In 1862 the Congress established a Commissioner of Internal Revenue. The first federal income tax was progressive and levied a three percent tax on incomes between $600 and $10,000 and five percent tax on incomes over $10,000.

In 1872 the federal income tax was repealed, but in 1894 the federal income tax made a brief comeback before being ruled unconstitutional in 1896.

On July 2, 1909, Congress passed a proposed Constitutional amendment, and it was ratified on February 3, 1913. The 16th Amendment gave Congress the legal authority to tax income. In 1914 the Bureau of Internal Revenue released the first income tax form, called Form 1040. The initial 1040 form was four pages in length and included only one page of instructions!

The brand new 1913 IRC contained this progressive marginal tax rate schedule:

  • One percent on income of $0 to $20,000
  • Two percent on income of $20,000 to $50,000
  • Three percent on income of $50,000 to $75,000
  • Four percent on income of $75,000 to $100,000
  • Five percent on income of $100,000 to $250,000
  • Six percent on income of $250,000 to $500,000
  • And seven percent on income of $500,000 and up

The Revenue Act of 1916 began the recurring Congressional practice of adjusting tax rates and income scales.

It’s Not Just about the Money
Congress asks way more of the U.S. tax code than simply raising money for the government. Through tax policy the federal government tries to nudge us to act in ways they deem preferable.

According to the IRS, “Legislators have three needs in mind as they prepare tax laws: The need to raise revenue, the need to be fair to taxpayers, and the need to influence taxpayers’ behavior.”1

Social engineering was concomitant with U.S. tax policy from the beginning. Alexander Hamilton proposed the first domestic tax on whisky and cited the health and moral implications of the drink as reasons to support the levy of a tax.

When people think of Congressional attempts to shape society through taxes, they often refer to excise taxes. They point to so-called “sin taxes” used to discourage the use of products and services that could pose a risk to someone’s health, such as alcohol and cigarettes. Or they highlight the gasoline excise tax or the luxury taxes on expensive, nonessential items such as luxury cars.

However, the IRC is replete with attempts by Congress to drive desired behavior through the income tax system. Prime examples of incentives for activities deemed to have social merit include:

  • Home ownership
  • Adoption
  • Child care
  • Charitable giving
  • Saving for retirement
  • And making contingencies for expected health costs

One of my all-time favorite authors is Louis Nizer. His great works include My Life in Court, The Jury Returns, and my personal favorite, Reflections without Mirrors. On June 8, 1985, this inimitable lawyer/author wrote a piece for the Chicago Tribune entitled “Tax Law As Social Engineer.”2 Here are some quotes from that article:

  • “The common conception that the sole purpose of taxes is to raise money for the government is a fallacy. Tax deductions are devices for social engineering.”
  • “Tax deductions are generally not motivated to escape a just tax. Most of them are deliberate financial inducements for desirable social ends.”
  • “Money is a bad master but a good servant. We use the tax code to serve the public good.”

Life Insurance Serves the Public Good
In the mid-to-late 1980’s the life insurance industry had a hot product—single premium life. This product maximized the tax-deferred build-up of cash in the policy by minimizing the death benefit. It was the product that drove changes to the IRC in regard to life insurance taxation and created MECs.

During that debate, the U.S. Government Accountability Office (GAO) was asked to weigh in. The GAO “provides Congress, the heads of executive agencies, and the public with timely, fact-based, non-partisan information that can be used to improve government and save taxpayers billions of dollars.”3

In January 1990, the GAO produced a memorandum entitled “GGD-90-31 Tax Policy: Tax Treatment of Life Insurance and Annuity Accrued Interest.” It was addressed to both The Honorable Lloyd Bentsen, Chairman, Committee on Finance for the United States Senate, and The Honorable Dan Rostenkowski, Chairman, Committee on Ways and Means for the House of Representatives.

  • The memorandum was submitted in response to Section 5014 of the Technical and Miscellaneous Revenue Act of 1988. Section 5014 called for the GAO to report on:
  • “The effectiveness of the revised tax treatment of life insurance products in preventing the sale of life insurance primarily for investment purposes; and
  • The policy justification for, and the practical implications of, the present treatment of earnings on the cash surrender value of life insurance and annuity contracts in light of the Tax Reform Act of 1986.”4

The GAO saw clearly that the life insurance industry had pushed the letter of the law, and perhaps violated the spirit of the law, with these products. The report was sometimes written in twisted logic and strained syntax. This couplet is exemplary:

“It may be preferable to give the tax advantage to those who would substantially reduce their coverage in the absence of the tax advantage, and not give the advantage to those who would purchase sufficient insurance even without the incentive. Unfortunately, it is very difficult to provide a targeted incentive for something that would not have occurred without the incentive, and not to provide incentives for activities that would have occurred anyway.”4

Whew. After much internal debate, the report concluded as follows:

“The only reason for not taxing inside buildup that we found to have merit is that doing so would reduce the amount of life insurance coverage that some people buy. Protecting survivors against income loss is a goal that society has traditionally supported.”5

Life insurance is desirable and deserves tax benefits because protecting survivors against income loss is something society supports!

Remember what the IRS stated as the three-prong purposes of tax policy:

  • Raise revenue
  • Be fair to taxpayers
  • Influence taxpayers’ behavior

However, the reason for maintaining a tax code provision designed to guide behavior is proof that it is working.

A Word of Caution
Changes in the IRC often have unintended consequences, and sometimes bring to light aspects of the system that no longer function as intended.

Consider IRC Section 163 allowing as a deduction all interest paid or accrued within the taxable year on indebtedness. This section applies to mortgage interest.

President Trump signed the Tax Cuts and Jobs Act (TCJA) into law on Dec. 22, 2017, and it brought sweeping changes to the tax code. The standard deduction nearly doubled from $6,500 to $12,000 for individual filers, and from $13,000 to $24,000 for joint filers.
Mortgage interest deductions already favored the richer citizens because low-income filers almost always used the standard deduction anyway.

It is estimated that nearly 90 percent of taxpayers simply took the standard deduction for tax years 2019 and 2020. This was a dramatic increase. Previous to the Trump tax reform law, about two-thirds of all taxpayers used the standard deduction.

Question: Who still itemizes deductions? Generally, the wealthiest taxpayers. For tax filings in 2017, 93 percent of taxpayers earning adjusted gross incomes of $500,000 or more itemized deductions. Those itemized deductions averaged $247,000.6 Are these same people waiting to own homes until Congress encourages them through tax deductions? No.

With roughly 90 percent of taxpayers taking the standard deduction, is the mortgage interest deduction working to guide behavior as Congress initially intended?

Lawmakers may wake up one day and eliminate the mortgage interest deduction if it only favors the rich.

Life Insurance as a Public Good
According to the IRS: “Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren’t includable in gross income and you don’t have to report them.”7

Since 1913 the IRC has recognized the social usefulness of life insurance, which helps protect widowed spouses and children and keeps them off of public assistance. Accordingly, Congress created liberal tax benefits as an incentive to those who put their hard-earned dollars into life insurance policies.

This is not an article about the tax advantages enjoyed by life insurance, especially cash value life insurance. Rather, it is a call to all independent financial professionals to proudly trumpet the public good that life insurance serves.

Question: Who is buying individual life insurance, and are the tax advantages Congress created for life insurance products leading to the intended results?

According to LIMRA’s 2020 Insurance Barometer Study, 54 percent of all people in the United States were covered by some type of life insurance in 2019. That year, 71 percent of consumers who owned life insurance had a term life policy, and 44 percent of policyholders owned a permanent life insurance policy.8 (Some people obviously owned both term and permanent.)

According to the ACLI 2019 Life Insurance Fact Book,9 a total of 10,289,000 individual life policies were purchased in 2018. This compares with 10,478,000 in 2017, and 10,207,000 in 2008. The average annual percent change from 2008 to 2018 was 0.1 percent and from 2017 to 2018 -1.8 percent.

Further, the ACLI states that 90 million American families rely on life insurers’ products for financial and retirement security. Americans purchased $3.1 trillion of new life insurance coverage in 2019. By the end of 2019, total life insurance coverage in the United States was $19.8 trillion. To put this staggering amount in perspective, the U.S. GDP in 2019 was $21.73 trillion.10

Although the life insurance death benefit is normally paid out in a lump sum whereas the Social Security’s Survivor benefit is paid over a number of years, beneficiary payments from life insurance annually equate to about 58 percent of the aggregate survivors’ benefits from the government.11

So how is the Life Insurance Industry doing?

  • Nearly six out of 10 Americans have life insurance. “Even for low-income households, 34 percent of households in the lowest income quintile and 55 percent of those in the second lowest quintile own life insurance.”12
  • Approximately 10 million new policies are sold annually.
  • Total life insurance in force nearly equals the nation’s annual GDP.
  • The life insurance industry pays out nearly 60 percent to survivors as does the government through Social Security.

It would appear that far more American taxpayers are benefiting from the tax advantages granted life insurance than those benefiting from mortgage interest deductions. In other words, if Congress intended to motivate people to provide protection for their families by offering tax advantages, it should feel justified to keep those advantages in place.

Summary
The Internal Revenue Code has three goals:

  • Raise revenue
  • Be fair to taxpayers
  • And influence taxpayers’ behavior


By offering tax deferred build-up, and tax-free treatment of benefits, the IRS for the last 108 years has recognized the social usefulness of life insurance. Indeed, the life insurance industry continues to effectively provide families with income replacement for survivors.

More Yet to Be Done
Still, 40 percent of Americans do not own life insurance. Even those that own individual life insurance, they own too little and a significant coverage gap exists.

One major obstacle remains sticky—earning the trust and respect of the average citizen.

In Sylvia Plath’s novel, The Bell Jar, the protagonist, Esther Greenwood, laments, “My mother had taught shorthand and typing to support us since my father died, and secretly she hated it and hated him for dying and leaving no money because he didn’t trust life insurance salesmen.”13

Perhaps no one had told Mr. Greenwood about the public good that life insurance performs and how Congress has recognized that social benefit for over 108 years!
Who are you telling?

References:

  1. https://apps.irs.gov/app/understandingTaxes/student/whys_thm05_les01.jsp.
  2. https://www.chicagotribune.com/news/ct-xpm-1985-06-08-8502060183-story.html.
  3. https://www.gao.gov/about/what-gao-does.
  4. https://www.gao.gov/assets/ggd-90-31.pdf.
  5. Ibid.
  6. https://www.taxpolicycenter.org/briefing-book/what-are-itemized-deductions-and-who-claims-them.
  7. https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds.
  8. https://www.limra.com/en/research/research-abstracts-public/2020/2020-insurance-barometer-study/.
  9. https://www.acli.com/Posting/RP20-010.
  10. https://www.bea.gov/news/2020/gross-domestic-product-fourth-quarter-and-year-2019-advance-estimate.
  11. http://files.brattle.com/files/7063_the_social_and_economic_contributions_of_the_life_insurance_industry.pdf.
  12. Ibid.
  13. The Bell Jar, Chapter 4, by Sylvia Plath.

The Kind Of World We Were Born Into

As a teenager, I needed course correction. My parents sent me 1,150 miles away to North Dakota to work on my Uncle John’s farm in Benson County. Uncle John started out as a farmer with ten acres in the late 1930s. When I served with him he owned 7,000 acres.

Benson County, where the farm was situated, is mostly flat, flat, and flat. It comprises an area of roughly 1,439 square miles. The farm consisted of somewhere around 11 square miles. It abutted a large body of water known as Devil’s Lake. In addition, the farm was proximate to the Spirit Lake Dakota Reservation located on the southern shores of Devils Lake. The people represented the Pabaksa, Sisseton and Wahpeton bands of the Dakota tribe.

The four people responsible for working the farm (which also had several hundred head of cattle) included Uncle John, his son Jimmy, a hired hand named Roger, and me. We rose early six days a week, worked hard all day, attended church on Sunday morning, and managed to get in some fishing now and again. When we really wanted to go crazy, we drove into the county seat of Minnewaukan to buy snacks.

One hot summer day I was a few miles from the house plowing fields with a Versatile Tractor and wide tillage hitch with tandem discs. The tractor stalled and would not restart. I sprayed ether into the carburetor as instructed, but nothing happened. I walked the few miles back to the house on dusty, heat reflecting “roads” (gravel paths).

Uncle John saw me coming. I was sweaty, tired, frustrated, and felt a little guilty.

“Needed a walk, did ya?”
“Tractor stalled and wouldn’t start. I cannot believe it. Stupid thing is stubborn.”
“So, are you mad?”
“Yes.”
“What kind of world did you think you were born into?”
“Huh?”
“In this world things break. We get our satisfaction from fixing broken things and persevering.”

My Uncle John never enjoyed formal education beyond the third grade. He would say, “And I haven’t used up all that yet.” This moment was one of many that demonstrated how much wisdom a person can gain apart from schooling.

The World We Were Born Into
There is an ancient song that reads:
“O Lord, what is man that You regard him,
or the son of man that You think of him?
Man is like a breath;
his days are like a passing shadow.”1

Human beings are fragile, and especially so at birth. Throughout human history, children have succumbed in high percentages from birth to five years of age. One study of burials in the Negeb suggests that in ancient times only 10 percent of people lived to age 35, mostly because 50 percent of children died before age five.2 Biologist and gerontologist Caleb Finch describes the average life expectancy in ancient Greek and Roman times as short, with people living for approximately 20 to 35 years.

“Unhygienic living conditions and little access to effective medical care meant life expectancy was likely limited to about 35 years of age. That’s life expectancy at birth, a figure dramatically influenced by infant mortality—pegged at the time as high as 30 percent.”3

Life expectancy is an average. If you have two children, and one dies before their first birthday but the other lives to the age of 70, their average life expectancy is 35.

Once we eliminate the incidence of child mortality, life expectancy has remained fairly stable throughout recorded history. That is, life spans have remained steady. There is, of course, a distinction between life expectancy and life spans.

Another ancient song indicates the fact that life spans in ancient times looked similar to today’s results:

“Our days may come to seventy years,
or eighty, if our strength endures;
yet the best of them are but trouble and sorrow,
for they quickly pass, and we fly away.”4

For all of us fortunate enough to reach the age of majority, we are not yet out of the woods. Life can be full, at times, of trouble and sorrow. Pliny melodramatically wrote, “Nature has, in reality, bestowed no greater blessing on man than the shortness of life.”5

As human beings, we live in a world full of dangers, mishaps, potential injury, an alarming number of pathogens, and our own tendency to take undue risks. Misery can keep us company in an inordinate number of ways.

Consider this list from the CDC6 regarding the leading causes of death (and incidents) in the United States in 2019:

  • Heart disease: 659,041
  • Cancer: 599,601
  • Accidents (unintentional injuries): 173,040
  • Chronic lower respiratory diseases: 156,979
  • Stroke (cerebrovascular diseases): 150,005
  • Alzheimer’s disease: 121,499
  • Diabetes: 87,647
  • Nephritis, nephrotic syndrome, and nephrosis: 51,565
  • Influenza and pneumonia: 49,783
  • Intentional self-harm (suicide): 47,511

Fixing Broken Things
In independent insurance distribution and financial services, we bring people the tools to fix brokenness before it happens.

Right Tools
Consider the basic financial tools that people need to live their ordinary lives:

  • Savings accounts and emergency funds
  • Health insurance
  • Disability insurance
  • Life insurance
  • LTCI
  • Property and casualty insurance
  • Education accounts
  • Retirement accounts
  • Annuities

What happens if people do not have/own these tools?

First example:
In 2009, in the United States, almost 3 million homeowners received at least one foreclosure filing. Lenders generally begin the foreclosure process once homeowners are delinquent by two or three months. The recession triggered a spike in unemployment. A foreclosure notice usually follows a pink slip by three to six months.

These people could not make three of their monthly mortgage payments. The tool they were missing? An emergency fund.

Question: Are you, as an independent financial professional, advising your clients to maintain an emergency fund?

Just 40 percent of Americans are able to cover an unexpected $1,000 expense with their savings according to a 2019 survey from personal finance website Bankrate.7

An emergency fund is a separate savings account used to cover or offset the expense of an unforeseen situation. Emergencies, by their nature, are unpredictable. When they happen they can derail your client’s financial stability. A sudden illness or accident, unexpected job loss, or even a surprise home or car repair can devastate your client’s life if unprepared. The size of an emergency fund will vary depending on your client’s lifestyle, monthly costs, income, and dependents, but the rule of thumb is to set aside at least three to six months’ worth of expenses.

Second example:
The Social Security Administration says, “Just over one in four of today’s 20 year-olds will become disabled before reaching age 67.”8 (Compared with the estimated one in nine of today’s 20-year-olds who will die before reaching age 67.)

Among the most common disability insurance claims are cancer, musculoskeletal disorders, and depression.

Question: Are you, as an independent financial professional, advising your clients to purchase disability income insurance?

What would happen if your client got hurt at work tomorrow and could not go in for a few months? What resources would the client’s family have available to carry them through that period?

What about a car accident or illness that takes a year or two for your client to recover?
Disability is a common cause of bankruptcy.

If your clients’ families rely on your clients’ incomes, then as a financial professional, looking out for your clients’ well-being, you should recommend that they buy it.

And Persevering
In independent insurance distribution, we guide people to establish the wherewithal to persevere through the hard times, lean times, or long lives.

There is a staggeringly immense lack of preparedness in the United States. As seen above, too many people have no emergency fund. Similarly, too few are even preparing to afford their lifestyles into their retirement years.

“As of June 2020, half of married retirees rely on Social Security checks for half of their income, according to the Social Security Administration, revealing a lack of cash elsewhere. That number jumps to 70 percent for unmarried people.

Just half of households, per the Federal Reserve, have any retirement accounts at all.”9

The financial services industry has poorly served a huge proportion of the American population in regard to helping people prepare for the future and the post-working years.

Question: Are you, as an independent financial professional, willing to serve the large population of people who are unable to afford your fees, or whose purchases would generate little, if any, compensation for you?

Summary
Maybe all of us in independent insurance distribution and financial services could make a great difference in more lives if we simply began asking all the people around us, “What kind of world did you think you were born into?”

In addition, maybe those of us who are comfortable need to be reminded that another painful aspect of the world we live in is inequity and disparity. As Sophia Mowlandejad wrote recently for the Fidelity Center for Applied TechnologySM:

“Financial exclusion is a reality for millions of Americans who don’t have access to useful and affordable financial products and services delivered in a responsible and sustainable way…. Exclusion runs across the financial lifecycle—impacting many different demographics. People excluded from mainstream financial services are more vulnerable to poverty, eviction, and food insecurity because it’s harder for them to build wealth, achieve financial stability, and generate better outcomes.”10

As an independent financial professional, are you willing to roll up your sleeves and begin tackling the real needs of millions of our fellow Americans, in particular the financially excluded?

Extending yourself to the least among us might get you the highest satisfaction of your career by simply helping them fix the broken things in their lives and preparing them for persevering.

References:

  1. Psalm 144:3-4, the Holy Bible, English Standard Version, ESV® Text Edition® (2016), copyright © 2001 by Crossway Bibles, a publishing ministry of Good News Publishers.
  2. Page 880, the ESV Archaeology Study Bible, copyright © 2017 by Crossway Bibles, a publishing ministry of Good News Publishers.
  3. Beltrán-Sáncheza H, Crimmins E, Finch C. Early cohort mortality predicts the rate of aging in the cohort: a historical analysis. J Dev Orig Health Dis. 2012;3(5):380–386. doi:10.1017/S2040174412000281.
  4. Psalm 90:10, the Holy Bible, English Standard Version, ESV® Text Edition® (2016), copyright © 2001 by Crossway Bibles, a publishing ministry of Good News Publishers.
  5. CHAP. 49.—THE GREATEST LENGTH OF LIFE, The Natural History, Pliny the Elder, translated by John Bostock, M.D., F.R.S., H.T. Riley, Esq., B.A., Ed.
  6. https://www.cdc.gov/nchs/fastats/leading-causes-of-death.htm.
  7. https://www.bankrate.com/banking/savings/financial-security-january-2019/.
  8. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf.
  9. https://www.forbes.com/sites/advisor/2020/10/06/studies-confirm-that-half-of-americans-struggle-with-retirement/?sh=7ab29c0d6f9f.
  10. https://fcatalyst.com/blog/april2021/how_exclusion_affects_consumers_across_the_financial_lifecycle?utm_source=everyonesocial&utm_medium=Inclusive%20Finance&utm_campaign=Social%20Media&es_id=fa17545252.

Call Me By (The Right) Name

Remember the song, “You Can Call Me Al,” by Paul Simon? Very catchy tune, and quirky lyrics.

“If you’ll be my bodyguard
I can be your long lost pal
I can call you Betty
And Betty, when you call me, you can call me Al”

Well, there is a backstory to these lyrics. The names “Al” and “Betty” in the song came from an actual incident in Paul Simon’s life. He was attending a party with his then-wife Peggy Harper. A French composer and conductor named Pierre Boulez also attended the party. Monsieur Boulez mistakenly referred to Paul as “Al” and to Peggy as “Betty.” This helped inspire the song.

Wait For It
I have had people forget my name, call me by the wrong name, and talk to me multiple times over periods of time without ever bothering to learn my name. These situations do not frustrate me as much as when I forget someone’s name, or worse, call them (confidently) by the wrong name.

True story. I have taken my cars to the same dealership for service for ten years. The service department has multiple standing desks to the right of the big service bay doors at which various service managers are stationed. I have worked with Brett, Tony, Leah, and several others, but have felt the strongest connection to Brian. This man lost 85 pounds in 2019! He talks about his kids, vacations, and is remarkably knowledgeable about the model cars we own.

For many years I have spoken his name and addressed him with enthusiasm even if I am being served by Tony, Brett, or others.

No joke. Recently I was standing at his desk after we had discussed the car’s issues, when Brian said, “My name is Jason.” Like that. Matter of fact.

I could not have been more apologetic.

He said that for many years, several times a year, the service managers have listened for me to trumpet his name! They see me pulling in and say, “Wait for it.”

I should probably be embarrassed, but in actuality, I wonder if it is my mistake to own. He does not wear a name badge, and there is no name plate on his desk. In all these instances did he ever think to straighten me out? I am totally at fault, but I also feel like I was trying to use his name to show respect.

Names and Brain Matter
Brain, not “Brian.” Whew.

According to the journal Brain Research (dedicated to publishing articles within the vastly expanding field of Neuroscience), something chemical and electrical happens in our brains when we hear our own names.

“There are several regions in the left hemisphere that show greater activation to one’s own name, including middle frontal cortex, middle and superior temporal cortex, and cuneus. These findings provide evidence that hearing one’s own name has unique brain functioning activation specific to one’s own name in relation to the names of others.”1
When we hear our name, we turn towards the speaker. Our name is a trigger for our attention.

We experience cognitive dissonance when someone uses our name to call someone else. It takes a moment to realize they are not talking to us. In my family, I am David, our son is David, my wife’s brother is David, and one of our daughters married a David. All of us turn when someone says, “David.”

At birth we are each given a name. That name is like a string that others tug to gain our attention. This began way back when our parents wanted us not to touch something, to come to them, to stop doing something, or to look in their direction for important information. When our name is spoken, not only does our brain register that someone wants our attention, but it also informs us that someone is focusing their attention on us.

Question: Are you skilled at using other people’s names when you are indeed making them the focus of your attention?

The Power of Using Another Person’s Name
When we say another person’s name in conversation it has several possible effects on them:

  • When you use their name, they know you know them.
  • Your tone when you say their name indicates how well you may know them.
  • Your facial expression when you speak other people’s names tells them what you think of them.
  • The frequency with which you use their name indicates how important they are in the context of a conversation.

These communication elements combine to create the true power of using someone’s name.

When we say another person’s name it is always in the context of making a statement, asking a question, or talking about the person to others. The use of another person’s name is usually followed by words describing feelings like happiness, concern, empathy, disappointment, or amazement. When they hear their name, they will also hear these emotions. They will feel either important and valued, or something negative.

Saying other people’s names gives you the power to shape the way people think you view them.

When someone looks back at a conversation that they had with you, your use of their name will cause them to remember how you made them feel.

Proper Use of Names
Like all the words you use in conversation, names matter. How you use them, how often, and in what context, matters.

For your consideration:

  • Say a person’s name when you sense you need to bring them back into the conversation. Just their name attracts attention and reminds them that they are the subject of your attention.
  • Say a person’s name to appear more competent in their eyes. They will hear your statements with personalized connotation.
  • Say a person’s name when you want to instill strong feelings in them during the interaction. Using a person’s name makes them feel important and validated.
  • Say a person’s name to establish trust between you. Their name on your tongue means you care and helps build an emotional connection with them.
  • Say a person’s name when you are going to pay them a compliment, give specific encouragement, or acknowledge something important that they said. A person’s name is part of who they are, and if you are going to speak about them intending to build them up, they will hear it with greater receptivity.

Sometimes, the only word necessary to convey everything we want to say to another person is simply their name. When someone we are with is overcome by emotion, acting irrationally, refusing responsibility, or simply at wits end, just saying their name can be calming, reassuring, and be all the confrontation that is needed.

The Gospel of John presents the first encounter of the risen Jesus with another person. She happened to be a woman who followed him for all the years of his ministry. She had seen him die. She had come to apply essential oils for burial.

“Jesus said to her, ‘Mary.’” (John 20:16)
Saying a person’s name says, “I see you. I am here.”

Summary
All people want to be treated as human beings, and not as prospects, projects, statistics, and certainly not objects. The simplest way to communicate to someone that they matter to you is to use their name. There is a danger, however, in using a person’s name in order to manipulate them. They will know if that is the intent. Misusing another person’s name will only diminish your own.

A proper, respectful use of another person’s name can elevate the value they receive in a conversation. Always end every conversation by using the other person’s name. They will leave the encounter feeling it was intimate and friendly.

Just make sure you are using the correct name. Remember “Brian?” (Actually, Jason).
Maybe he will write a song entitled, “You Can Call Me Brian.”

Reference:
https://www.sciencedirect.com/science/article/abs/pii/S0006899306022682.