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Heartland HighlightsA p r i l 2 0 1 3 V o l u m e m m X i i i i s s u e i X

73The MyTh of 4%The retirement Crisis

12ABC’s of AnnuiTiesmyths and Truths

BloCk TrAdingNow Available through pershing

SALES IDEA

Total Living Coverage®

Overcome common long term care insurance objections with Total Living Coverage®The power of Total Living Coverage ( TLC) comes from its l inked benefit design, which links life insurance and long term care (LTC) coverage in a single life insurance policy. TLC helps make common concerns about long term care insurance disappear.

LTC to TLC

Concern:

Concern:

Solution:

Solution:

“I might never need long term care.”

“I might be able to afford coverage now, but I may have to cancel or decrease my benefits if rates go up in a few years.”

No matter what happens, your clients will always get a benefit from TLC.

No LTC benefits used? Full death benefit is •paid to your clients’ beneficiaries1

Some LTC benefits used? Reduced death •benefit is paid

All LTC benefits used? Guaranteed residual •death benefit is paid automatically, for no additional charge

You don’t need to worry about your clients missing out on the advantages of traditional LTC insurance policy. TLC also offers:

Contractual informal care• coverage provided by friends and neighbors

Caregiver Support Services• for policyholders and their immediate family members3

Privileged Care® •Coordination Services to help build a plan of care

0-Day Elimination Period• for home care benefits

Discounts• for couples and individuals with preferred health

Waiver of charges• while on LTC claim

International care• coverage at home or in a facility

Your clients never have to be concerned about rising premiums because with TLC, the premium paid at issue pays fro at least a guaranteed minimum level of benefits.

Guaranteed level of LTC benefits•

Guaranteed death benefit•

No lapse guarantee• 2

Plus:

See policy for details.

The no lapse guarantee refers to the Guaranteed Minimum Benefit Rider, which provides a conditional guarantee that will keep the policy in force even if policy values are too small to do so. Certain policy rights, if exercised, will end this guarantee.

Caregiver Support Services are provided by CareScout® which is a Genworth business that provides professional elder care-related support activities.

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The Myth of 4%Two recent studies by Morningstar Research and the Wall

Street Journal, point to the retirement crisis ahead for

retirees taking a 4 percent withdrawal rate or more.

How much can one withdraw annually from a retirement portfolio without running a big risk of going broke? Conventional wisdom has long favored the “4% rule” which states that if a retiree withdraws 4% from their retirement account (adjusted annually for inflation) that the account could be sustained for over 30 years, which would most likely last through their retirement.

New research published by Morningstar sends us caution regarding this 4% rule advice. Morningstar states that if a retiree would like “a 90% probability of achieving a retirement income goal with a 30-year time horizon and a 40% equity portfolio” should withdraw just 2.8% instead of the conventional 4% that has been told to clients for years. Why only 2.8%?

The problem, Morningstar reports, is that yields on government bonds are “well below historical averages.” Most financial advisors will use a Monte Carlo forecast model to project how much their clients can afford to spend; however, the current government bond yields are not reflected in most of these models being used. The problem with these models is that they use a random sequence of annual returns that, over time, net out the historic average, which does not account for the historically low rates that we are currently in that are likely to persist for some time.

Morningstar also reports that “while the average annual arithmetic return on the Ibbotson Intermediate-Term Government Bond Index from 1930 to 2011 was 5.5%, the interest rate … today is close to 2%, which is 3.5% lower than the historic average. An analysis that assumes an

average bond return of 5.5% in the first year will significantly overestimate early retirement portfolio returns.”

The only way to correct the problem and still maintain a 90% probability of achieving the retirement goal, according to David Blanchett (Morningstar’s head of retirement research), Michael Finke (Texas Tech University) and Wade Pfau (American College) recommend that retirees and advisors assume that yields will remain close to their current level for some time before gradually reverting to their long-term averages. Morningstar adds, “This approach can better replicate the actual bond returns a current or near retiree can expect during retirement.”

Morningstar concludes that a retiree who assumes the 4% rule will have “approximately a 50% probability” of running out of money over 30 years. That might be a lot less security than advisors and clients are looking for out of their accounts.

First Heartland can help with this problem. There are many solutions to this problem that we can utilize to achieve a client’s overall goals. The solutions vary from case to case so give us a call to talk about your client so we can personalize the solution to their need. One client could use a VA with a 5% guaranteed withdrawal rider, while another client might want to put their money into a life insurance policy for purposes of protecting their loved ones in the event that something happens to them as well as for a retirement income vehicle. Let us help you and your clients achieve that 4% goal with our many solutions.

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Agent spotlightTroy Thompson

Troy started Thompson Financial, inc. in 2002. He had already been working in the financial services industry for over 14 years at a time. Before that, Troy grew up on the prairies of Colorado and attended st. Johns College in Kansas. After earning his Bachelor’s degree from Concordia university in Accounting, he immediately entered the financial industry, working for 14 years at a single company. Thompson Financial has a focus on service and building long-term relationships with clients.

relenTless neTworking A relATionship-BAsed prACTiCe

prospeCTing seMinArs for BABy BooMers

Troy’s best marketing idea is relentless networking. There always people to meet that you may be able to start a business relationship with at some point. Occasionally, Troy says he meets someone who he definitely doesn’t want a business relationship with. He believes this is just as valuable as meeting someone that he is excited about because it keeps him from wasting resources on that person. He suggests service clubs, board memberships, and other volunteer opportunities in your community as a way to begin networking. He also uses the various social media available and works with FHC to add content. He has had success with traditional networking and now that social media is available, he considers that a work in progress.

Troy’s most recent sales idea was to invest in Savvy Social Security for Boomers by horsesmouth. He will be working with compliance to put on prospecting seminars aimed at Baby Boomers. The software has already given him great insight into social security that is benefiting his clients.

“WHeN i groW up i Would liKe To...on seCond ThoughT,

i doN’T WANT To groW up!”

Troy looks at his practice as relationship based, rather than product based. Therefore, his favorite product is the one that both the client and him are happy with and that meets the client’s needs.

Troy has a lot of hobbies - he enjoys running, gardening, watching his son play football and run track. He has started competing in barbecue contests in the past year and is working toward

running his first marathon in June. He has been married to his wife, Ruth, for over 25 years. They have three children: Luther, Katelin and Jonathon.

Troy’s first job was feeding cattle - he got to drive the truck until he accidentally popped the clutch and knocked his dad off - then he had to throw the hay instead! He likes any kind of food he can cook in his smoker, and enjoys any sport his children are participating in. He is still in search of his favorite travel spot, but he knows it involves warmth and sunshine. Let us know when you find it, Troy!

Disability Insurance Myths

Why Your Clients Should Protect Their IncomeAsk Your Client These questions: Don’t Let your clients be

misled by common DI myths:If you become too sick or hurt to work, could your »

family survive without your income?

Does your family have the means to cover current »debts and daily living expenses? Especially for a prolonged disability or a permanent disability.

How much disability coverage do you have? »Do you have group or private disability coverage?

It won’t happen to me. I expect to stay healthy. »

Disability insurance is too expensive. »

Government programs will take care of me. »

I can always get disability coverage later. »

I can rely on my savings. »

How much coverage do you need?

Group Disability »Individual Disability »Social Security Disability »Additional Income (spouse or savings) »

Mortgage / Rent »Utilities »Auto Payments »Child Care »Loans & Credit Cards »Other expenses »

Sources of Income

Monthly Expenses

Please take the time to help your client calculate their monthly income and expenses. If there is an income shortage, they should consider protecting their income with an individual DI plan.

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staff spotlight

Abby ClAyTonAbby has worked at First Heartland for almost seven and a half years. she spends most of her time focusing on

pershing accounts and everything that has to do with NetX360. she also works with new representative during their

transition over to FHC.

AT firsT heArTlAnd

ouTside of work

During her time at First Heartland, Abby has enjoyed most that every day something different happens. Whether there is a problem to be solved on an account or a project to be done, she loves the challenge of having new things to figure out each day.

October will mark three years that Abby has been married to her husband. They have three children: Lexi is 9, Blake is 20 months and Brylee is 8 months old. When she is not at the office, Abby enjoys spending time with her family, attending sporting events, being outside and cooking. Her favorite travel spot is Disney World and the family is already planning to go back in 2016!

Abby’s first job was as a lifeguard during the summer before she turned 16. She loves sushi and pretty much all Italian food. Her favorite sport to play is soccer, and her favorite sport to watch is hockey. She likes all suspense and action movies and could watch The Holiday a million times, but lately she has been watching the Disney movie Cars with her little boy. Cute!

Block trading is now available on the Pershing Platform! Pershing’s Block Trading and Rebalancing (BTR) capabilities are designed to bring a new level of scalability, operational efficiency, transparency

and control to portfolio management.

Through NetX360, you can access a comprehensive platform that makes it simple to create, maintain and monitor multiple

models with varying degrees of flexibility. It is designed to allow you to assign, rebalance and process trades across

multiple accounts at once, in a transparent environment where you can easily monitor and manage activity.

The system allows streamlined model construction, integrated block trading, and model rebalancing tools as well as automated drift

surveillance reporting.

Block Trading

The Modeling and Rebalancing allows you to do the following:

The Order Generation and Management allows you to do the following:

If you are interested in the platform and would like to watch a demo, please contact Abby Clayton by email or at 636.695.2809 for more information.

Create custom security and asset class-based models which may include cash, equity, fixed income, »mutual funds, exchange-traded funds and American Depositary ReceiptsDefine absolute or relative drift tolerance bands »Assign replacement securities; flag securities to hold »Link a model to one or more accounts »Rebalance one or more accounts against a model and create a block order of buys or sells »Rebalance all securities back to the model targets or only those securities outside the tolerance bands »(drift). Review proposed orders and edit in a preview screen »Exclude one or more securities from a rebalance scenario, without removing it from the model »

Bulk liquidate individual securities across accounts or fully liquidate accounts via one screen »Generate block orders across account(s) based on targeted outcomes (percent, shares or dollars) or use »manual selectionReplace securities (one-to-one or one-to-many), across security types (equities and mutual funds); it also »allows for mutual fund exchangesRaise cash through order generator (models only), generate funds available for withdrawal and maintain »the account’s target allocationsView all block orders based on status: created, verified, partial executed, executed and rejected »Order Types = Market, Stop, Limit »Security Types = Equity, Options, Mutual Funds »Edit, merge and rename block orders prior to transmission for execution »

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Are your clients long term care aware?

If your client were to sustain a debilitating injury

or illness while employed, their accumulated

sick leave may cover living expenses - at least for

the short term - but what about the long term?

Without a steady income, how long would it be

before their savings and investments would be

depleted?

Many people in their 40s, 50s and 60s probably

don’t spend a lot of time thinking about these

questions, or planning for long term care,

especially while enjoying good health. Typically,

unless a friend or family member has required

extended care, most of us know little about what’s

involved. But with the rising cost of care and

rate of inflation, it’s never too early - or late - to

consider the options for funding long term care.

Click here for the Client PDF

“I’m not old enough to be concerned...am I?”

“How can I make sure I’ve prepared properly?”

“How much can it cost?”

“How do I find out if I can apply as a cancer survivor?”

“Does long term care mean a nursing home?”

“Are cancer survivors eligible for long term care insurance?”

“What about my health insurance?”

“Aren’t people who have had cancer charged higher rates?”

Although it may be difficult to talk about the prospects of declining health, in the blink of an eye, circumstances could change. In addition, the likelihood of needing long term care often increases with age-related diseases. A 2011 report from the Alzheimer’s Association, “2011 Alzheimer’s Disease Facts and Figures,” estimates nearly 10 million baby boomers will develop Alzheimer’s disease with another 4 million to develop some type of dementia.

The best solution is planning. And part of that planning should include looking into all of your available options, including long term care insurance.

That varies depending on the level of care, the type of residential facility, and the geographic location.

However, the financial impact should not be underestimated. According to the Genworth 2012 Cost of Care Survey conducted by CareScout®, the median nationwide cost for a one-year stay in a nursing home (private room) is $81,030, and may be higher in certain parts of the country. At those rates, it’s easy to see how long term care costs could deplete retirement income and assets accumulated over a lifetime.

For cancer survivors and other individuals, eligibility to apply does not guarantee that the underwriters will approve you; however, finding out if you are eligible to apply is the first step in the process.

Years ago, long term care usually meant nursing home care. Today, most long term care is provided informally at home, either by family caregivers or friends, or by paid home health care providers.

Long term care services are also provided in assisted living facilities and at community-based adult day health care centers. The more advanced levels of care are provided in nursing homes, including those with memory impairment or Alzheimer’s units.

Being a cancer survivor does not automatically disqualify you. Many survivors who have a long term care insurance policy applied for coverage and were accepted subsequent to diagnosis and treatment. Every applicant is evaluated individually, as is every type of cancer. The type of cancer, the phase or stage, the type and length of treatment, the length of time since diagnosis and treatment, and your current health are among the factors the underwriters consider.

It’s a common misconception that long term care is covered by health insurance. In fact, most health

Not necessarily. Each insurance company has its own underwriting standards and price structures.

Planning for your long term care needs can help you be prepared for whatever the future may bring.

care insurance policies do not cover long term care. Generally, Medicare only covers long term care under very specific circumstances for a limited time following a qualifying hospital stay. One of the eligibility requirements for Medicaid includes spending down your assets.

Questions your clients might have about Long Term Care

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Roth IRA Conversions:Myths vs. TruthsWith the changing landscape of Roth IRAs, it’s no wonder there are misunderstandings and myths among

financial advisors as well as taxpayers. To help you prepare for potential sales obstacles, the following truths

may be helpful in dispelling those myths.

Myth 1:

Myth 2:

Myth 3:

Myth 4:

Myth 6:

Myth 5:

Myth 7:

Truth:

Truth:

Truth:

Truth:

Truth:

Truth:

Truth:

Money converted to a Roth IRA cannot be used for five years without additional taxes and/or early withdrawal penalties.

Roth conversions only benefit “younger people”.

Converting to a Roth IRA should be done only if your retirement tax rate is likely to be higher than your current rate.

A traditional IRA provides the same income in retirement as a Roth IRA.

The Roth IRA conversion mostly benefits a person’s heirs.

High-income earners do not qualify for a Roth IRA conversion.

IRA assets should never be used to pay income tax on a Roth IRA conversion.

100% of the amount converted or contributed to a Roth IRA can be used immediately without any additional taxes (and without penalties if an exception applies). Distributions from a Roth IRA are accounted for in the following order:

1. Contributions (not subject to taxes and early distribution penalty)

2. Conversion amounts (not subject to taxes but early distribution penalty may apply)

3. Earnings (subject to taxes and early distribution penalty applies unless the taxpayer meets the qualified distribution requirements)

Roth IRA conversions can provide an advantage for people age 70½ and older because there are no required minimum distributions (RMDs). Younger people may still benefit from the Roth IRA conversion because they most likely have more time to accumulate money on a tax-free and tax-deferred basis.

Although an ideal candidate for a Roth IRA conversion may possess the characteristic described above, the decision to convert must take into account several other factors. For example, when the compounding is tax-free and the client does not need to take RMDs from the account, as in a Roth IRA, the after-tax value of the account may be greater than if the compounding had been only tax-deferred and RMDs are required to be taken, as is the case with a traditional IRA or qualified retirement plan.

A traditional IRA account with the same value as a Roth IRA will provide less income in retirement because, upon distribution, the pretax money will be subject to income taxation.

The person who converts and accepts the tax liability of the conversion is typically the one who benefits from the conversion because he or she is able to enjoy more tax-free spendable income in retirement. If that person dies and there is money left over, then the heirs will benefit from the remaining tax-free income that has been passed on to them, assuming the qualified distribution requirements relating to beneficiaries have been met (for example, a Roth IRA account held for five years and the Roth IRA holder dies).

As of 2010, income restrictions were eliminated by the Tax Increase Prevention and Reconciliation Act (TIPRA), which means that every taxpayer can convert a traditional IRA or qualified retirement plan to a Roth IRA.

If a person paying income tax from IRA assets is benefiting from one or more other characteristics of a Roth IRA (for example, tax-free compounding), then the conversion may still be advantageous.

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Myth:401(k) Plans are IN,Defined Benefit Plans are OUT

Over the years, I have heard many reps express interest in doing more 401(k) business. During that time, we have seen some reps have great success, while many have failed to gain traction. There are many great reasons to be interested in doing 401(k) business. They include:

Recurring Revenue Stream »

Potential to Cross Sell to Plan Participants »

It’s a Demand Product (People might ask you to help them set up a plan) »

IF not PrICE, thEn What? Therefore, it seems to make sense that we should have some other focus when discussing qualified plans other than having the lowest cost platform available. There is a reason that your clients choose to do business with FHC’s registered reps rather than placing all of their money with eTrade. By working with the registered rep, they receive professional service, relationship and the benefits of solutions customized to their needs.

StanD out by FoCuSIng on Small buSInESS oWnErSWhile we all might salivate over the idea of taking over the 401(k) of Ford or Microsoft, these very large organizations are probably not the “target market” for most reps. After, all there is only one General Electric but there are thousands of potential 401(k) providers. However, it is highly likely that each of us know of many small to mid size businesses that might benefit from our services.

High Competition Coupled with

New Disclosure Rules

Extreme Downward Pressure on

Fees

Commodity Sale?+ =

WhEn mIght a buSInESS oWnEr DESIrE morE than a 401(k) Plan? There are multiple reasons that a business owner might be interested in establishing a qualified plan. First, the business owner might be interested in establishing a 401(k) to provide a valuable retirement benefit to their employees. Second, their primary focus might be to set aside large sums of money for themselves. As the professional advisor, we should work to make sure that we match the business owner with the plan that best suits his or her objectives.

What Can bE DonE to SEt morE monEy aSIDE For thE buSInESS oWnEr?

For Business owners who are content setting aside $51,000/year for their retirement, some sort of profit sharing plan might very likely be their best solution. However, there are many successful small business owners who may feel that the $51,000/year contribution to their profit sharing plan would be grossly inadequate.

For these highly successful individuals, a Defined Benefit Plan might be the best solution. By leveraging a Defined Benefit plan, either in addition to or instead of a profit sharing plan, the business owner could potentially make drastically larger tax deductible contributions to their Defined Benefit Plan.

gEttIng StartEDWhile we might be tempted to overwhelm ourselves with minutia, it is actually very simple to start taking advantage of the Defined Benefit opportunity. The first step is to identify potential prospects. Do they own a business? Would they like to set aside more money on a tax deductible basis? Do they have the money to invest? If so, you have a prospect! Once you believe you have a prospect, you just need to gather some basic data and leverage the resources available through First Heartland to help you get started. Once you get started, 1 out of 3 should close.

thE $288,000 oPPortunItyIf one out of three cases close, and the average target is 100,000 dollars, then a rep should be able to increase their take home pay by opening 1 case per month.

tImE to gEt StartED!There is no time like the present to take advantage of this potentially lucrative opportunity. Contact Scott Hoff at 800-444-7244 x1217 to learn more!

Ow

ne

r StrEngthSProvide important employee benefitShift investment risk to employeesAbility to vary or eliminate contributions annually

WEaknESSESOwners and key employers are most often left with a Retirement Income GapContributions limited by Highly Compensated Employee Rules

Em

plo

yE

E StrEngthSMay contribute substantial sums of money tax deferred (2013: Maximum Deferral $17,500)May benefit from matched contributions from employer

WEaknESSESEmployees bear investment risk

When determining which plan is the best fit, it can be helpful to examine strengths & weaknesses.

Current Age Profit Sharing Plan DB Plan - Level Funding DB Plan - Maximum Funding

40 $51,000 $64,343 $95,801

45 $51,000 $94,758 $155,541

50 $51,000 $150,497 $200,030

55 $51,000 $223,331 $232,728

60 $51,000 $230,135 $322,841

Bring in experts for plan design

Would they like to drastically increase tax deductions to

qualified plans?

Establish how much they want to set aside

Find successful business owners

PotEntIal ChallEngES WIth 401(k) PlanSWith that said, there are also many challenges associated with these plans. Given the popularity of these plans and their potential revenue opportunity, there is near endless competition for these plans. Given the high supply of vendors who willing to establish and maintain 401(k), clients have the option of playing multiple vendors against each other in an effort to determine who can have the lowest plan costs. Coupled with new rules about fee disclosure, conversations can easily begin to focus on price, price and price. To the extent that the conversation about 401(k) plans is dominated by price, it would seem that reps will find susceptible to challenges of promoting a commoditized product.

BAD INFORMATION: The facts of the situation were wrong and they don’t actually have any earned income

ANAlySIS PARAlySIS: A business owner is a good candidate, but is so analytical that he cannot make a decision to move forward.

Business owner is a good candidate, capable of making a good decision, and decides to move forward.

CASES tHAt won’t work

CASES tHAt wILL CLoSE

$100,000 Target

80% Case Split

90% Commission

$72,000 in Revenuex x =

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Myths and Truths

myth: Annuities are too complicated.

myth: If I die while receiving income from my annuity, the insurance company keeps the rest of my money.

myth: Annuities have hidden expenses.

myth: Annuities lock up my money so I can’t access it.

myth: Annuities have high fees.

The truth is, even though the mathematics behind an annuity may seem complicated, as a concept,

annuities are not rocket science. You give money to an insurance company and in return they give you a

guarantee - either a guaranteed interest rate, guaranteed income for a specified period of time, or even

guaranteed income for life.

The truth is today’s annuities offer options that let your beneficiary receive any remaining value left in your

contract.

The truth is that any charges, fees or expenses associated with annuities are not hidden from you. In fact,

every annuity comes with documents for you to review. The contract and prospectus or statement of

understanding that outlines any charges, fees or expenses help you make an educated and informed

decision before you buy an annuity. In addition, annuities provide a valuable combination of benefits that

other products can’t provide. Protecting your principal from market loss along with guaranteed income

for life with flexibility and opportunities for increases are just some of the benefits that annuities offer over

other products. In the end, the insurance company uses these fees to help support the guarantees made

to you and their other customers.

Many annuities are designed to be long-term income products and today’s annuities offer various ways for

you to access the money if something should happen. Most annuities give you access to at least a portion

of the money each year. Some annuities may specify a commitment period before you can access the

money from the annuity, but you can still withdraw money if needed, although certain fees and penalties

may apply including income tax and tax penalties. Keep in mind the longer you own an annuity the more

time you give your annuity the opportunity to grow. Think of baking a cake. If you don’t follow the directions

and take the cake out of the oven early you’ve not given the cake enough time to fully bake.

While some annuities’ fees may seem higher when compared to other products, annuities provide a

valuable combination of benefits that those other products can’t provide: things like principal protection

from market loss, along with guaranteed income for life with flexibility and opportunities for increases. The

insurance companies use these fees to help support the guarantees made to you, and for a lot of people,

that’s a fair trade-off.

about annuities

Click here to view the video and share with your clients!

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Leaders Conference 2014M o n t a g e B e v e r l y H i l l s | B e v e r l y H i l l s , C A

March Qualification Standings

Production Report

Q u a l i f i e d O n T r a c kRobert CremeriusCarter DavenportBrad HarrisDennis HennessyParker/ApplebaumDanny ParkerDave SentnorDennis SikorskiBrad Walton

A.W. AbelPierre BadertscherJohn BarriosBrian BoedickerNorman BrownsherWayne Scott BruntScott BybeeTroy ChristensenMatt CoffieldJamie CrossBill CrouchDavid Erickson

Brad Wa l to nFir st Heartl and Capital, Inc.

Sco tt Wa l kerFir st Heartl and Corporation

Troy Ch r i s ten s enFir st Heartl and Consultants, Inc.

T o p P r o d u c e r s YTD by company

M a r c h T o p T e n$77,869$71,110$66,332$55,629$50,301$42,903$39,191$39,118$35,889$33,572

Brad WaltonWayne Scott BruntMatthew MartinezBrian BoedickerTerry MaschingNorman BrownsherBrian SmithParker/ApplebaumMike PalmquistMichael Kock

The best compliment you can give Fir st Heartland is the recommendation of a qualit y agent. Take a minute to email a referral to Matthew Evans.

Brian FrankeJeff HalesKyle KirwanMichael KockDavid KoverRobert LegerMatthew MartinezTerry MaschingDennis MeyerGeorge MiddendorfJohn OwenDavid Schoenfeldt

Eric SegerBrian SmithSteve SolysDavid SorensonMark SudderbergTroy ThompsonTom UlmerDoug VerleyScott WeirTim Wellman