cincinnati chapter fsp financial prosfsp.net/cincinnati/collection/mar apr 2010 financial pro.pdfby...

Cincinnati Chapter FSP

www.financialpro.org

Solutions for a Secure Future (formerly the American Society of CLU & ChFC) Financial Pro

News and Information Letter of the Cincinnati Chapter www.sfsp.net/cincinnati

Cincinnati Chapter

4010 Executive Park Dr. #100, Cinti, OH 45241 Phone: 513-554-3062 Fax: 513-563-9743

[email protected] Chapter Administrator: Lauren Estness

Mar/Apr 2010

2009-2010 BOARD OF DIRECTORS

OFFICERS:

President Joseph F. Stenken, CLU, ChFC, JD 513-595-2518 [email protected] Immediate Past President Andrew F. McClintock, CLU, ChFC, RHU, REBC 513-421-2522 [email protected] President-Elect/Membership Chair John D. Dovich CLU, ChFC (513) 579-9400 [email protected]

VP Of Education Robert S. Cottrell, CFP, CLTC, MBA (513) 792-7605 [email protected] Secretary/Treasurer James LeBlond, CLU, ChFC (513) 324-5612 [email protected] TRUSTEES:

Continuing Education/VTC Richard Kait, JD, LL.M, CLU, ChFC (513) 362-1537 [email protected] Communications Chair/Sponsorship Patrick J. Joyce, ChFC, CLU 513-375-7285 [email protected] Public Relations Chair Sonya E. King, JD, LLM (859) 692-2242 [email protected]

What’s Inside:What’s Inside:

President’s PodiumPresident’s Podium

Get More Out of Your Membership...Volunteer!Get More Out of Your Membership...Volunteer!

Help Clients Manage Their Retirement IncomeHelp Clients Manage Their Retirement Income

Prometric Sends Notice of License Prometric Sends Notice of License Suspension Incorrectly to Some AgentsSuspension Incorrectly to Some Agents

SFSP Sponsorship OpportunitiesSFSP Sponsorship Opportunities

Taming a Bear MarketTaming a Bear Market

Welcome to Our New Members!Welcome to Our New Members!

SFSP

Membership

Financial Pro

It looks like spring has finally sprung! We have had a great year of programs with a couple more good ones on the way before we finish out the year. The end of the current year means the next year is set to begin. For the next chapter year we are looking for members to serve on one of the local board’s committees. If you are inter-ested, or if you know someone who you think would be interested in serving the local chap-ter, please let me or one of your board members know. As you may know, the chapter has a sponsorship program that you or your organization may want to take advantage of. There are three levels of sponsorship: $1,000, $2,500, and $5,000 for a year. Each level of sponsorship provides from one to four free SFSP member-ships, as well as other benefits, including recognition in the newsletter, on the chapter web-site, and at our education programs. We have two more programs before the summer. On April 22 we will have a joint meeting with Cincinnati NAIFA at the Kenwood Country Club where John Gephart will be speaking. Then on May 20 we will have our annual meeting at the Queen City Club. Robert Buechner will be speaking on Roth IRAs. Have a great spring, and I hope to see you at one of our programs! Joe Stenken, CLU, ChFC, JD

President’s Podium

Joseph F. Stenken CLU, ChFC, JD

You attend the chapter meetings and the international conferences when possible, but what else is there? Get involved and make the most out of your membership dollars by exploring the volunteer options available within the Chapter. Look what you can gain by getting involved: Networking - What a great opportunity to get to know your peers. Your committee involvement brings additional networking time with other chapter members, which may lead to additional business opportunities. Education - Develop additional knowledge and industry skills by working on the various tasks that each commit-tee has on their agenda. Your involvement allows the chapter to bring our meetings and attendance to new levels. With a wide array of committee options, The Society of FSP Cincinnati Chapter provides the opportunity for any experience level, time constraints and interests. If you are interested in getting more involved and volunteering for a committee, please complete the Committee Interest form on the following page

Financial Pro

GET MORE OUT OF YOUR MEMBERSHIP...VOLUNTEER!

Financial Pro

Help Clients Manage Their Retirement Income By Hugh F. Smart, JD, CLU, ChFC Your clients’ retirement may last for more than 30 years. Their lifestyles, needs, and the risks they face will cer-tainly change over three decades. You need to think of their retirement as being four separate stages for income management purposes. We have iden-tified these stages as: • Pre-Retirement – the 10- to 15-year period leading up to their retirement. • Initial Retirement – lasts 5-10 years; often an exhilarating period when retirees reconnect with family, travel, start a new business venture, or devote time to hobbies, avocations, or new lines of work. • Seasoned Retirement - typically lasts between 10 to 30 years. Although some of the novelty of retirement may have worn off, many retirees experience an increasing level of contentment during these years. • Mature Retirement - Period in which retirees may require long-term or nursing home care, and may no longer be able to live independently due to disability or illness. Your clients’ retirement income needs to be planned and managed separately for each of these four stages. You can begin building a framework for helping them to manage their income using these five steps. Step: 1. Estimate the Time Duration of Each Stage This step is difficult only because it asks you to project what your clients’ lifestyle, health, and dreams will be 20-30 years or more into the future: • Pre-Retirement - Number of years until your client retires. • Initial Retirement – Number of “high energy” years in retirement. • Seasoned Retirement - Years between end of “high energy” and life expectancy. • Mature Retirement – Based on family history, expected duration of frailty. Step 2. Estimate Expenses for Each Stage This step will take some time and will also require you and your client to make certain assumptions. However, it will give you a framework to plan the allocation of their retirement income: • Basic Expenses. Day-to-day expenses that ensure your clients’ desired quality of life. • Healthcare and Frailty Expenses. This category should include funds set aside not only for normal health care costs, but also more extreme costs in the event of an unexpected illness or injury that might require substantial recovery or nursing home care. • Discretionary Expenses. Money allocated for travel, the purchase of luxury items, or for pursuing long-held goals or aspirations. • Wealth Transfer Expenses. The costs of ensuring that your clients’ remaining wealth is transferred tax efficiently to the next generation. • Charitable Gifting Expenses. May or may not play an important role in your clients’ definition of a meaningful retirement.

Financial Pro

Help Clients Manage Their Retirement Income Separately estimate your clients’ basic, healthcare, discretionary, wealth transfer, and charitable gifting expenses in each of the four stages. Step 3. Identify the Sources of Retirement Income Be sure to include all sources of income your client will have available to them: • Social Security • Defined benefit and other qualified pension plans • IRAs • Non-qualified investments and savings • Variable or fixed annuities • Stocks, bonds, mutual funds, or certificates of deposit • Investment real estate • Savings accounts Social Security and pension plan dollars are fixed income streams. Your clients’ qualified and nonqualified assets can be combined to generate income in a cash flow reserve. That reserve can be tapped to provide the income short-age between their needs and their fixed income for each stage. Step 4. Time for a Reality Check After you and your client determine the duration of each stage, estimate their expenses for each stage, and inventory their income available in each stage, then take time for a reality check. What percentage of their income will they need to allocate to each category of expenses? Are they comfortable with this allocation? If not, what assumptions are they willing to change? Step 5. Manage Assets for Income in the Cash Flow Reserve Just as you and your client have estimated expenses and income separately for each stage, now you must help your clients manage their assets to provide that estimated flow of income. Things to consider include: • Allocating certain assets for income • Investing conservatively for the next stage • Investing some assets to assure future income • Reallocating at the beginning of each stage You can help to fine tune a retirement plan that is unique to each of your clients and you can provide them with the tools necessary to effectively manage their retirement income. All you have to do—just add life! Hugh F. Smart, JD, CLU, ChFC Columbus Life Insurance Company 400 East Fourth Street, Cincinnati, OH 45202 Phone 1.800.677.9696 x6715 The information and content provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Columbus Life does not provide tax or legal advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Co-lumbus Life makes no warranties with regard to the information or results obtained by its use. Columbus Life disclaims any liability arising out of any person’s use of, or reliance on, the information.

400 East Fourth Street • Cincinnati, Ohio 45202-3302 • 1.877.ADV.MKTS • [email protected]

Financial Pro

This weekend, Prometric, the Continuing Education (CE) vendor that the Ohio Depart-ment of Insurance contracts to administer the Ohio CE program, sent out suspension no-tices with the CE transcripts to agents in the 2008-2009 compliance period. Some agents may have received this notice inadver-tently. Only resident agents with a non-compliant status on their CE transcript should have received the suspension no-tice. If you are a resident agent with a compliant status on your transcript or a non-resident agent, you should not have received the sus-pension notice. If you did, PLEASE DIS-REGARD. Your license is still valid and will not be suspended. Again, only resident agents with a non-compliant status on their CE transcript should have received this suspension no-tice. The Ohio Department of Insurance and Pro-metric apologize for any inconvenience this error may have caused. If you have further questions about the status of your license, please call Prometric at 800-532-2170 or the Ohio Department of Insurance’s licensing division at 614-728-5860.

Prometric Sends Notice of License

Suspension Incorrectly To Some Agents

The Cincinnati Chapter Board of Directors will be meeting soon to start planning the meetings, topics and speakers for next year and would like to get some feedback from our members. If there is a specific topic or speaker that you would like the chapter to add to the calendar for next year, please contact your Chapter Executive, Lauren Estness at [email protected].

Suggestions?

Financial Pro

SFSP Sponsorship Opportunities The Society is pleased to count among the participants in our sponsorship program companies that embody the spirit of professionalism that allows those in the financial services profession to thrive. Our sponsor partners con-tinue to be at the vanguard of today's ever-changing financial landscape. These sponsors support the Society’s mission and core values. Through their involvement in the chapter, the Soci-ety is able to continue its work of representing the profession, of encouraging uncompromising standards of ethics, and of promoting continuing education for its members. If you are interested in becoming a sponsor, please contact our sponsorship chair, Patrick Joyce at (513) 375-7285 or [email protected]. You can also contact our Chapter Executive, Lauren Estness, at (513) 554-3062 or [email protected].

SILVER SPONSOR $1,000

1. One annual SFSP membership 2. One ¼ page advertisement in every issue of The Financial Pro. 3. One article authored by a representative from your organization

included in one edition of The Financial Pro 4. Company name and logo featured on chapter website (and can be linked to companies

website if the address is provided) 5. Company name and logo placed on a placard displayed prominently at all SFSP events

GOLD SPONSOR $2,500

1. Two annual SFSP memberships 2. One ¼ page advertisement in every issue of The Financial Pro 3. One article authored by a representative from your organization included in one edition of

The Financial Pro 4. Company name and logo featured on chapter website (and can be linked to companies


PLATINUM SPONSOR $5,000

1. Four annual SFSP memberships 2. A “2-Minute Commercial” for your organization at one of the four major meetings 3. One ½ page advertisement in every issue of The Financial Pro 4. One article authored by a representative from your organization included in one edition of

The Financial Pro 5. Company name and logo featured on chapter website (and can be linked to companies


Financial Pro

By W. Jeff Martin, CLU, ChFC The equity markets have wreaked havoc on many 401(k)’s. For those in retirement, the market in 2008 created special problems because those individuals are faced with the diffi-cult decision of taking permanent withdrawals at a time when their accounts may be down 10% - 50%. Selling shares to fund income needs means those shares can never regain their prior 2008 value. This will likely require an immediate and long-term change in strategy. There may not be much you can do to assist those folks, but there are strategies you can recommend to those between ages 35-55 who have seen their accounts become “201(k)’s.” I suggest that age group because they are more likely to have the income and the immediate concern to take steps now to move out of harm’s way. These persons should consider adding a conservative element to their retirement income strategy in order to provide a hedge should a similar economic environ-ment occur again. If their income is above the Roth IRA limit, there are few options that compare favorably in the long run with the tax deferred nature of life insurance cash values. Lets’ assume you have a client age 65 who is retiring with a $1,000,000 401(k) invested in a diversified mix of stock mu-tual funds. The client and spouse plan to take $75,000 annual income on January 1 of each year for a period of 15 years. We will also assume the couple’s portfolio matches the per-formance of the S&P 500 from 1973-1987. The average gross rate of return for that period was 11.28%. In those 15 years, there were four down years and the index declined each of the first two years by -14.8% and -26.5% respec-tively. (This period was chosen to illustrate the impact vary-ing returns can have on a portfolio during income distribu-tions.) At the end of the 15 years, using the S&P 500 as our bench-mark and $75,000 as our income need regardless of market performance, meant that we ended year 15 with just over $450,000 left at age 80. But what would have happened if the client had chosen not to make a withdrawal in any year following a down market year for the S&P 500 index? That same couple would have had a balance of approximately $1,675,000 (versus $450,000 if they continued to take a withdrawal every year)! That even includes taking a RMD withdrawal in year 10 of

$33,500 as they would be required to do despite the down market the previous year. So the obvious question would be, how does the client replace the lost income of $75,000 in those years when the market is down and the strategy says don’t take a 401(k) withdrawal (other than if the client must make a RMD as required by law)? The couple would start a whole life policy that would serve as a backup where they could make tax-free with-drawals to basis and then loans (only as needed) to fill in those gap years after a market decline. This strategy works especially well for someone who is unable to con-tribute to a Roth IRA and has the excess income to make

premium payments to a plan for 10-to-20-to-30 years. Ask your prospect: “If you could contribute to a Roth IRA, would you, and how much would you contrib-ute? The prospect will very likely tell you a number in the $10,000 - $25,000 range. Since a Roth is not available, you now have a way to create a money purchase plan for them using a whole life policy with payments guaranteed

to cease at or before age 65. I much prefer whole life in this situation because it offers lifetime guarantees in both cash value and death benefit that we can be assured will be there at age 65 and beyond. If you try to fund a traditional universal life product to provide even close to the same level of guarantees, the premium will likely be higher than the whole life plan. If the clients own term insurance, they may be able to convert or give that up. I suggest the clients look at cash value life insurance in lieu of the bond portion of their planning. There is a guaranteed cash value for life and strong mutual carriers have continually paid excellent dividends (although it must be noted that dividends are not guaranteed). The strategy gives them a backup plan for those years when a down market makes any withdrawal a difficult thing to swallow knowing those shares can never be recovered. Good Selling! Jeff [email protected]

Taming A Bear MarketTaming A Bear Market

Financial Pro

William Bruns John D. Dovich & Assoc., LLC 625 Eden Park Drive, #310 Cincinnati, OH 45202 (513) 579-9400 [email protected]

Welcome to Our New Members!

David Hare CLU, CFP Ameriprise Financial 3244 Range Ct Mason, OH 45040 (513) 234-7923

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