© Copyright 2007
US FlagJanuary 15, 2007 Edition
1stLifeSettlements


OVERSEAS ACTIVITY FROM THE NYSE – The NYSE is in discussions with the Tokyo Stock Exchange aimed at forming an alliance. Concurrently, the NYSE and Goldman Sachs Group signed an agreement to acquire a significant stake in the National Stock Exchange of India.

MASSIVE GLOBAL MARKET – According to McKinsey & Co., assets in world financial markets amounted to $140 trillion in 2005...more than triple the size of the global gross domestic product. Looks like the NYSE has been reading McKinsey's mail.

MASSIVE IRA - Individual retirement account assets reached a record high of $3.67 trillion in 2005. That is about 2.6% of that massive global market above.  Interestingly, IRA assets exceed those in private-sector defined benefit plans ($2.15 trillion in assets) and defined contribution plans ($2.97 trillion in assets), making IRAs the largest source of retirement income outside of Social Security.

LOMA'S CRYSTAL BALL - Click here to read LOMA's insurance industry forecast for 2007.  Among the predictions are flat to modest growth and the opportunities presented by the imminent retirement of the Baby Boomer generation. 

LEGISLATIVE AGENDA - The Independent Insurance Agents & Brokers of America (the Big "I") has announced its 2007 legislative agenda at both the federal and state levels.  To review it, click here. 

BAD NEWS FOR STATE FARM - A Mississippi federal court has awarded $2.7 million in damages to a Mississippi couple whose home was destroyed by Hurricane Katrina.  State Farm had taken the position that the damage was caused by water and not wind.  The jury award includes $2.5 million in punitive damages.  While State Farm is likely to appeal the verdict, the court decision could have a major impact on other Katrina-related lawsuits.  The biggest longer-term losers, however, could be coastal homeowners who may find it increasingly difficult to purchase homeowners insurance, as insurers pull out of these areas.

MORE LAWSUITS ON EXCESSIVE 401(k) FEES - Fidelity Management is the latest to be sued for alleged excessive fees in violation of fiduciary obligations in the management of 401(k) plans. This is the tenth such suit from the same law firm and you can expect a lot more.

MORE LAWSUITS ON ANNUITY SALES TO SENIORS - The Minnesota attorney general has filed a lawsuit against Allianz, claiming that in its sales of annuities to seniors, the insurer "violated Minnesota laws that prohibit false advertising, consumer fraud, deceptive sales practices, and sale of deferred annuities that are unsuitable for the buyer."

CLASS ACTIONS FOR SECURITIES FRAUD DOWN – Class action lawsuits are down in general and securities-related class actions are down significantly. According to the Stanford Law School Securities Class Action Clearinghouse, filings are 43% lower than the 10-year historical average since the adoption of the Public Securities Litigation Reform Act of 1995.

Attention Kettley Back Room Technician® Subscribers!
(And others serious about sales support for their practice)

We understand that this old and venerable sales support tool just became old, venerable and expensive! Individual subscriber rates for the Sales Edition are now $499 per year and "early renewals" cost $399 per year.


We have an alternative support tool for you to consider…the Virtual Sales Assistant (VSA). Here are four reasons why:
  1. The VSA is “the most comprehensive sales support tool in the industry.” (Click here to see the Table of Contents for proof.)
  2. The VSA has all the 2007 changes online and ready for your use now.
  3. The VSA is available 24/7/365 on any computer in the world with Internet access.
  4. The VSA will give you a whole lot more for a whole lot less. The price is no more than $21.95 per month (discounts may apply), no annual contract and there is a 30-day “free look.”

Check out the more than 50 VSA Sales Ideas. Take advantage of the VSA’s 30-day “free look,” use just one of the ideas and the VSA will pay for itself. And it will probably pay for the Back Room Technician® also!

SCHWAB WOOS BROKERS - Charles Schwab is offering cash incentives for brokers who are willing to transition to independent advisers. The program is currently available in 11 states where Schwab will provides loans with a $100,000 minimum for brokers to acquire office space, buy computers and to provide working capital.

GRASSO APPEAL – Former chairman of the NYSE has asked a state appeals court to overturn a ruling that he return some of his $187.5 million compensation package.  Grasso's attorneys are basing the appeal on a claim that Grasso was entitled to a jury trial on charges he was overpaid.
 
GRASSO TAXES – According to the New York Post, New York state tax authorities are investigating Grasso for not filing New York income tax returns in 2002 and 2003.  Mr. Grasso, however, has five different homes, which may complicate the determination of where his main residence is located for state tax purposes.

NASD ARBITRATION AWARDS ONLINE - The NASD has released a new Arbitration Awards database that enables users to perform web-based searches for NASD Arbitration Awards free of charge, seven days a week. Users may search for awards by case number, document text, date of award (by date range), or a combination of document text and date of award. Awards can be viewed online, printed, or downloaded as text-searchable PDF files. See it at www.nasd.com.

FED TO HOLD LINE – Apparently the Federal Reserve sees declines in the rate of inflation in major areas as encouraging, but they are not enough to ease concerns about possible general inflation. The Fed is still concerned about long term inflation, so don't expect lower interest rates any time soon.

PUNY PUTNAM PUNISHMENT – Former Putnam CEO, Lawrence J. Lasser, should have no problem paying his fine to settle an investigation into his role in a scandal involving preferred marketing agreements. Lasser received a $78 million severance package and the fine is a whopping $75,000.

THE TERMINATOR TAKES ON HEALTH INSURANCE - California Gov. Arnold Schwarzenegger has introduced a health insurance reform plan that would require all Californians to purchase health insurance.  With health insurance costing a California family of four in the neighborhood of $11,000 today, a big question is how to make coverage affordable enough to require its purchase.  Regardless of the outcome of Gov. Schwarzenegger's proposal, it should make for some interesting debate on a topic of vital importance to the nation as a whole.

SUN LIFE PURCHASE - Canadian company Sun Life has agreed to purchase Genworth's U.S. group benefits business for $650 million, thus extending its presence in the U.S. market.

STOCKHOLDER ACTIVIST – The pension fund for New York City employees is joining the ranks of stockholder activists by asking companies to allow shareholders to vote on executive compensation. "We have had enough of bonus payments, salary increases, retirement benefits, and other payoffs from equity-based plans that are often not even remotely correlated with the performance of executives."

MDRT QUALIFICATIONS FOR 2007 - In 2007, financial services professionals must earn at least $81,800 in eligible commissions to qualify for the 2008 Round Table.  To qualify for membership in the 2008 Court of the Table, applicants must earn at least three times the MDRT requirements: $245,400 in eligible commissions. To qualify for membership in the 2008 Top of the Table, an applicant must produce six times the MDRT requirement: $490,800 in eligible commissions. At least 50 percent of the production requirement must come from individual and group life, accidental death and dismemberment, annuities, disability income, long-term care and critical illness, or pensions written by life insurance companies.  The remainder may come from mutual funds, securities, wrap accounts, health insurance and pensions from nonlife insurance companies. See details at http://www.mdrt.org.

NET TO GET REAL-TIME STOCK QUOTES - The NYSE will conduct a one-year pilot program that will allow Web sites to provide visitors with real-time stock prices.  Google and CNBC are already said to be on board at a cost of $100,000 a month. Don't expect this service from FSO any time soon!

HIGH HOPES – According to the RBC Expectations Index, consumers have high expectations for the coming year. The index measures consumers' economic outlook and was 83.8 in January...a steep increase from 55 in December. The current index shows 40% of Americans believe their personal finances will be better six months from now.

MEDICARE PART D - Amid controversy as to whether it will result in lower prescription drug costs for seniors, the House has passed legislation that directs the Secretary of Health and Human Services to negotiate directly with drug manufacturers for lower prescription drug prices.  The bill, however, faces an uncertain future in the Senate and President Bush has promised to veto it should the legislation reach his desk.

USE OF EXECUTIVE BENEFITS - According to the Todd Organization, executive benefits are widely used by publicly-held companies to attract and retain a quality executive team.  More information on the study is available here. 

MARGIN DEBT NEAR RECORD - Margin debt reached $270.52 billion in November, just under the record $278.53 billion during the Internet frenzy. However, experts say that this time the debt is being is driven by "legitimate need, rather than speculative insanity." Let's hope so.

SMALL-CAP, BIG RETURNS – According to Ibbotson, small company stocks rose 16.2% in 2006...up from 5.7% in 2005. Large company stock returns were 15.8% and 4.9% respectively. The small-caps have now beat large-caps for eight consecutive years. 

2005 BENEFITS COSTS - The Employee Benefit Research Institute estimates that employers spent $1.3 trillion on employee benefits in 2005, about 19% of total employee compensation.  Retirement benefits accounted for 46% of spending in 2005, compared to 48% in 2000, while health benefits increased to 44% of total benefits spending in 2005, up from 42% in 2000.

AMT THREATENS MIDDLE CLASS – The alternative minimum tax was enacted in 1969 to ensure that wealthy Americans couldn't avoid paying taxes, but it now threatens middle class tax payers. As the Kiplinger Tax Letter put it, "The AMT is a lot like the weather: Much discussed and often lamented."  According to Kiplinger, don't expect much more than AMT "band aids" until lawmakers are forced to review the entire tax system prior to the expiration of the 2001 tax cuts after 2010.

TAX CUTS HELPED THE RICH – According to the nonpartisan Congressional Budget Office and as reported by the New York Times, it is the richest Americans who saw the biggest benefits from President Bush's tax cuts. In fact, tax rates for middle-income Americans actually rose slightly in 2004, but fell for families earning more than $1 million. However, the rich still paid a bigger share of total taxes paid, which is attributed to their incomes growing far more rapidly and the widening gap between the rich and the poor.

PUBLIC WORKERS SAVE LESS - According to a survey by Fidelity, public sector workers save less for retirement in their defined-contribution plans than private sector counterparts...about 23% less.  And why not?  No one has told them that their defined benefit plans are in more trouble than Social Security.

LIFE SETTLEMENT STUDY – An annual study conducted jointly by LISA and Agent Media is now complete.  Last year's study, conducted in November 2005, showed that while the majority of agents admitted they had elderly clients whose life insurance needs had changed since they purchased their policy, only 18% of agents said they'd completed one or more life settlement transactions. This year, however, 31% said they'd completed at least one transaction. That is a pretty significant jump in agents offering life settlements. As with last year, the results indicated that one of the main barriers to transacting a life settlement is proper training and knowledge.