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 February 1, 2006
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BROKER'S ROLE – A new SEC rule
is designed to make it easier for consumers to know what they're
getting when they hire a financial professional. Stockbrokers who hold
themselves out as financial planners must be clear about their role. If
they're providing advisory services, then they must act in a customer's
best interest, as must traditional financial planners. If they're
acting strictly as a broker (read salesperson), then they must make
that clear to the consumer. Click here
for more on this courtesy of the Wall
Street Journal.
DESIGNATION
PROLIFERATION – There are now over 100 separate titles
used by financial professionals to imply expertise. With no central
regulator and titles that can be earned easily, some regulators are
becoming concerned. Some states are already taking action and
spokespeople for long-established industry educational institutions,
such as The American College and the College for Financial Planning,
are expressing concern about the proliferation of designations leading
to lawsuits. A fairly comprehensive list of designations and
their requirements is located here.
MORE PENSION FREEZES
– IBM is not the only high profile company to freeze its pension
plan already in 2006. Add Sprint Nextel, Alcoa and Harleysville to the
number. There will be lots more. U.S. businesses simply don't have a
choice. The Pension Benefit Guaranty Corp says that one in ten of all
defined benefit pension plans in the country have now been frozen.
FINGERPRINT ID
– Some European banks are experimenting with identifying
customers by fingerprints using radio frequency identification and
biometric scanning. In five years' time, major banks across the globe
could be using these timesaving devices.
SPEAKING OF
FINGERPRINTS - The NAIC appears to be treating a proposed
fingerprinting regulation, which would set up a national system for
collecting life insurance agent and broker fingerprints, as a "hot
potato," with the NAIC Market Regulation and Consumer Affairs Committee
failing to advance the model to executive committee. Perhaps not
too surprising in light of industry disagreements on the subject.
While NAIFA supports passage of the model, the ACLI objects to NAIC
control of the fingerprint repository. The ACLI also supports
exempting producers who are licensed with the NASD. We'll see if
the insurance commissioners discuss the fingerprinting model at their
February meeting.
STATE OF HEALTH CARE
- Here's a health care round-up...all pretty depressing.
UnitedHealth's share prices fell after announcing their most recent
quarterly profits. The company posted "only" an 18% increase in
quarterly profit, which disappointed some analysts. The nation's
HMOs earned almost $7 billion in the first half of 2005, a 21.2%
increase over the same period in 2004. You have to wonder, if an
18% increase in profits isn't sufficient to maintain share value, how
any progress can be made in providing "affordable" health care
insurance to the nation's consumers. Then we have the American
College of Physicians predicting that the primary medical care system
"could fall apart in the United States without immediate
reforms." Reasons: very few young physicians are going into
primary care and those currently in primary care are under such stress
that they're looking to get out. Proposed solution: a system of
paying primary care doctors that rewards them for preventive care that
keeps patients healthier and saves money.
LAPTOP STOLEN WITH
CLIENT DATA – A laptop belonging to an employee of
Amerprise and stolen from a locked car contained about 158,000 client
names and account numbers. The computer also contained some advisor's
names and Social Security numbers. All customers and advisors who had
their security breached have now been notified and privacy damage is
said to be limited. Yes, the employee was fired.
MORE SERIOUS DATA
BREACH – The FTC has hit ChoicePoint with a $10 million
civil penalty and $5 million in "consumer redress" for data security
lapses. The fine is said to be the largest in FTC history. About
163,000 consumers were involved and at least 800 cases of stolen
identity resulted from the breach.
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SLOW QUARTER - U.S. economic growth
slowed sharply in the fourth quarter to the weakest pace in three years
as consumers spent less, growth in home building eased and businesses
were less eager to boost investments.
HALL OF SHAME - The Coalition
Against Insurance Fraud has released its 2005
Insurance Fraud Hall of Shame.
AFLAC POLICY COPYRIGHTS – The
Duck has won a preliminary injunction against Assurant (which includes
Fortis and John Alden) for alleged copyright infringement on four
voluntary worksite policies covering cancer, accidents, hospital
confinement and illnesses requiring hospitalization.
INFLATION HIGHEST IN 5 YEARS –
The consumer price index rose 3.4% last year as inflation rose at the
fastest pace in five years, with costs for energy, housing, education
and medical care leading the way.
GM AND FORD – Both U.S.
automakers are struggling to overcome serious problems and closing
dozens of plants and laying off tens of thousands of employees.
Basically they have lost significant market share to foreign
competitors. Reasons: retirement plan cost, health care cost, probably
some bureaucratic inefficiency and, unfortunately, better products from
abroad.
CONSUMER COMPLAINTS - The NAIC
maintains an electronic Complaint Database System, which monitors
consumer complaints about insurance companies. More information
is available at http://www.naic.org/.
BLOCK CAN'T BLOCK BROKERS - A
federal judge rejected H&R Block's attempt to stop three brokers
from jumping ship and taking their clients with them. The judge failed
to extend a temporary injunction and added that the company's own
policies encouraged the "midnight departure tactics" that the brokers
used.
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PENSION SOULTION, SAVE MORE - If
your clients are counting on a "fix" to pensions and Social Security,
they are going to be disappointed. Now is the time to help your clients
understand that the only "fix" is for them to save more money.
The old save 10% of your income just won't hack it anymore. If you have
30 years to accumulate, 15% will provide about one-half of your income
at retirement. With just 20 years left, you'll need to sock away
25% to get the same results.
CAN'T SAVE $200,000
– A study done for the Financial Planning Association reveals
that nearly 75% of Americans are pessimistic about their ability to
save $200,000 in net wealth in their lifetimes. Worse, more than 20%
say the lottery is best way for them to reach that goal.
CAN'T SAVE...PERIOD
– According to a Commerce Department report, the American saving
rate went negative in 2005, to a minus 0.5 percent, the lowest since
the Great Depression. This means that, rather than saving money,
people dipped into existing savings or took on additional debt to fuel
their spending habits.
TAX ON SOCIAL
SECURITY – Middle-income seniors are getting slammed by
the tax on Social Security payments and may not know it. The tax was
originally aimed at taxing a portion of Social Security benefits for
"high income" earners but, since it has not been adjusted for inflation
in 23 years, it is affecting millions of middle-income seniors. For
married couples, each dollar of income over $32,000 makes $.50 of
Social Security benefits taxable and at $44,000 of income, $.85 of
benefits are taxable.
HSAs UP SIGNIFICANTLY
– Created in late 2003, the National
Underwriter reports that HSAs have climbed above 3 million. That
is triple the number of March last year.
INCENTIVE TRUSTS
– This planning tool is becoming increasingly popular. Instead of
allowing beneficiaries to receive money at a given age, incentive trust
heirs must reach milestones or take actions. For example, children
might receive a $25,000 bonus when they graduate from college or marry.
Or they might receive funds matching money they earn. As they say.
"What gets rewarded, gets done."
WOMEN DECISION MAKERS
– A study by NPD may be surprising to some, but we have known it
for years. Men defer to women when it comes to choosing movies,
restaurants and television shows. The only areas where men said they
had any clout involved personal electronics purchases, the family car
and setting household budgets. That's not bad clout though!
TAX TIPS
– If you refinanced your home last year, don't overlook the tax
break of home mortgage points. If you have a household employee,
remember to provide a W-2 to your employee by January 31...especially
if you plan to run for public office!
WILLS ON THE WEB
- Hartford is set to offer inexpensive wills to its large group life
policyholders. Plan members can simply enter pertinent information and
print out a will legal in all states.
EMPLOYEE BENEFIT
TRENDS - MetLife has released its annual Employee Benefits
Trends Study. A copy is available here
(registration is required).
DRA OF 2005 AND LTC
– The proposed Deficit Reduction Act of 2005 will make it tougher
for people to "make themselves eligible," eligible that is for Medicaid
paying the cost of long-term care in a nursing home. "It's an
ill-conceived law that's an attack on seniors," says Bernard Krooks,
editor of Steve Leimberg's Elder Care Law Planning newsletter and
founding member of Littman Krooks in New York. "My initial reaction is
that the substantial DRA changes to the Medicaid rules will make it
much more difficult for seniors and those with disabilities to access
much-needed long-term health care. Without proper planning, many
seniors will be forced to sell their homes or take out reverse
mortgages in order to receive long-term care."
LTC CLAIMS -
Long-term care insurance that provides a benefit for a limited period,
such as for three years, is considerably less expensive to purchase
than unlimited (lifetime) benefits. According to a study of
long-term care claims released by the American Association for
Long-Term Care Insurance, that limited protection may be all that most
people need. The study examined both open claims and closed
claims and found that only 14.4% of closed claims lasted longer than 24
months, with 33.2% of open claims lasting longer than 24 months.
Only 5.6% of closed claims lasted longer than 36 months (16.2% for open
claims). The study results would seem to suggest that less
expensive limited coverage may be adequate for the majority of
individuals...and is certainly better than no coverage at all!
SUITABILITY
STANDARDS FOR ALL - The Senior Protection in Annuity
Transactions model regulation adopted by the NAIC extends suitability
protection only to consumers age 65 and older. The ACLI is now
advocating that product suitability standards for annuities be extended
to all consumers. More information on the ACLI position is
available here.
HURRICANE RELIEF
- The IRS has issued a guide to assist individuals and businesses
victimized by last year's hurricanes Katrina, Rita and Wilma. The
guide includes information on applicable tax breaks, which areas
qualify for what assistance and guidance on claiming that
assistance. Click here for a copy.
SOME RETIREMENT
FACTS TO PONDER –
- When
asked, "What steps have you taken in preparation for yourself getting
older," 22% of respondents 55 and over said none. (WSJ)
- 14%
of respondents age 55 and over have long-term care insurance but 43% do
not have a will. (WSJ)
- 25%
of current retirees rely totally on Social Security for their income
and in 2004, the median income level of Americans age 65 and over was
$15,043. (Employee Benefit Research Institute)
- The
median balance in 401(k) plans is $18,000. The average balance for
workers in their 60s with more than 30 years of service is $168,000.
(Employee Benefit Research Institute)
LIFE SETTLEMENTS UP AGAIN –
Conning reports that life settlements increased to $5.5 billion in face
amounts in 2005...up from $3.3 billion in 2004..
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