Solutions That Leave an Impression In the Wholesale Brokerage World

LINKED BENEFITS A Two Word Strategy for Securing Your Clients’ Financial Future

Opening Thoughts A new, better way to address a serious problem Putting your clients in the best possible position for retirement You Can Do This! –It’s not complicated! Strengthen Client Relationships A New revenue center for 2011 Zenith Marketing Group has unique resources to help you get started – Today!

Eight Words or Less “If you can’t state your position In eight words or less, you don’t have a position.” – Seth Godin

The Question Is… “Are you willing to speak to your clients about something unfamiliar to you and them, in order to do what’s best for them?”

Perfect Timing What do clients want? –100% liquidity –Tax-advantaged benefits –Guarantees –Upgrade performance of “Safe Money” without investment risk Linked Benefit products address these client concerns.

Why Now? Environmental factors –Low rates –Lower risk tolerance among clients –More money “sitting on the sidelines” than ever before 2010 marks the dawn of a “new era” in retirement protection planning –Pension Protection Act of 2006: New tax advantages –New products New products address major concerns clients have –Extended care protection with no on-going out-of-pocket costs –Control of assets; 100% of money back if things change –If an extended care need does not occur, beneficiary receives a tax-free Death Benefit –Streamlined underwriting makes selling to insurable clients easy

What Do I Have To Do? How Do I get Started? It’s Simple…Just ask these questions: –What is your plan should you have an extended care need? –If you needed extended care today, which assets would you liquidate first? –If something happened to you today…what would you do? Start a new conversation with clients who have assets and do not have a solid plan for their long term care needs.

Fiduciary Responsibility If your clients have assets and have no plan in place – who is to blame? –Will their heirs seek to blame advisors who did not recommend a plan of action? –Have your clients signed a letter indicating that they’ve declined asset protection? –Can you build a sound financial strategy without a plan for LTC costs? Doing What’s Best For Your Clients

The Facts About Extended Care Less than 10% of available buyers have purchased coverage 70% age 65 or older will need it temporarily or permanently 70% Nursing home* $80,000/year private $73,000/year semiprivate Assisted living unit* $3,100/month Home care aide* $25/hour Adult daycare* $60/day *National Averages. Actual costs vary by state.

Who Needs It & How Much? In 2008, 9 million Americans required Long-Term Care Services By 2020, that number will be 12 million 20% of clients will need care for more than 5 years 40% will require care in a nursing home for some time

Assisted Living Facility Monthly Rates (One Bedroom/Single Occupancy) RegionMedian Annual RateFive Year Annual Growth USA$38,2207% New Jersey$57,3005% North Carolina$31,9501% Pennsylvania$34,9208% Maryland$38,1007% New York$39,0606% Nursing Home Daily Rates (Semi-Private Room) RegionMedian Annual RateFive Year Annual Growth USA$100,9235% New Jersey$65,7005% North Carolina$85,5934% Pennsylvania$80,3005% Maryland$110,9605% New York$39,0604% Nursing Home Daily Rates (Private Room) RegionMedian Annual RateFive Year Annual Growth USA$75,1905% New Jersey$109,8654% North Carolina$71,1755% Pennsylvania$90,3385% Maryland$83,5853% New York$116,8003% Median-Annual Care Costs: 2010

Claims Are Lasting Longer Average duration of claim; 3.8 years –73% of Claims Start at home Carriers are seeing significant percentages of cognitive claims (nearly 50% of all claims) –These claims produce longer stays –Alzheimer’s / Dementia –Stroke / TIA Impact on Caregivers, Family, and Friends –Emotional –Financial –Logistics –Family Dynamics –Everyday Life

Activities of Daily Living To better understand “extended” care, think of the activities that you performed when you woke up this morning. You probably: –Climbed out of bed (Transferring) –Used the bath or shower (Bathing) –Walked to the bathroom (Continence) –Got dressed (Dressing) –Used the toilet (Toileting) –Ate breakfast (Eating)

Activities of Daily Living While we are healthy it is easy for us to take for granted the above Activities of Daily Living (ADL's). However, when you or a loved one is stricken with a degenerative condition such as a stroke, performing these ADL's becomes impossible without the assistance of another person. This type of care is chronic (full-time) and thus becomes very expensive. Cognitive Impairment, example Alzheimer’s, is a stand-alone trigger of benefits

Are You Prepared To spend down your retirement savings? –$80,000 X 4 years = $320,000 –$320,000 X 2 (includes spouse) = $640,000 To Spend $640,000?

If you had $1.00… You could set it aside in a safe place, knowing that it will always be there when you need it. –At 4% interest, money doubles after 18 years –At 5% interest, money doubles after 14.4 years OR Deposit only 20 cents into a product that provides tax-free leverage… freeing up 80 cents to use as you like –Transform your 20 cents into One Full Dollar of LTC Benefits… –Set aside the Whole $1 and obtain $5.00 worth of protection What would you do? How would you choose to spend it?

Ask Clients About Their Plan! What is your plan should you have an extended care need? Which assets would you use first to pay for an extended care need?

Traditional LTC Insurance Why Do Clients say No? –Too Expensive –Premiums Can Go Up! –What if I don’t use it? Do I get my Money Back? –It’s too complicated –I don’t need it - I have plenty of money set aside

Which Plan Makes More Sense? Government programs –Medicaid –Medicare –CLASS provisions Self-insuring Traditional long-term care insurance Linked Benefit Products

How To Begin Client Discussions Do you have an extended care plan? How will you fund your extended care plan? Do you have assets readily available? –Note: If the client does NOT have assets readily or is just beginning to save on their own, possible Linked Benefit ongoing premium sale. How would you feel about a more efficient way to self-insure? How do you feel about overpaying for your care? Important Questions to Ask:

A Linked Benefit Product… What Is It? Linked benefit product: a base product such as life insurance or an annuity with a "rider" that provides long term care benefits if needed. Provide Multiple Benefits, paying out the first benefit, as needed. Single Premium Products –Life insurance policy (Death Benefit) and LTC benefits –Fixed annuity (Cash value while alive) and LTC benefits On-going Premium Products –Life insurance policy and LTC benefits –Fixed annuity and LTC benefits

Linked Benefit Products An “asset repositioning” story, moving your client’s money “from the left hand to the right hand” – they still control it. Get client assets off of the “Sidelines” –Fixed alternatives are offering very low rates –Client risk tolerance is down – clients seeking safety and control (liquidity). –Huge population of retirees

Linked Benefits = Leverage Return of Premium Death Benefit Extended Care Reimbursement Provides a money back guarantee through the Return of Premium Rider on single premium and certain flexible premium universal life policies Your premium payment can be returned to you, minus any loans, withdrawals, or benefits paid, and is subject to the terms of the Return of Premium Rider If you change your mind Income tax-free death benefit Any portion of guaranteed death benefit not used for long-term care benefits will pass to beneficiaries income tax-free Any money borrowed or withdrawn from the policy will reduce the death benefit If you never need extended care Up to 5 times premium dollars Reimbursements for qualified long-term care costs intended to be income tax-free Benefits paid up to the maximum monthly amount specified in your policy Specified amount of death benefit used to reimburse long-term care costs Optional rider can provide coverage for specified number of years after death benefit is depleted Cost of riders deducted from policy’s account value If you need extended care Obtain More Coverage At Less Cost

5 Benefits of Linked Products Tax-Free Long Term Care Benefits –A more efficient way to self-insure –Asset protection –Protecting income sources from depletion Return Of Premium –Client controls what they invest Death Benefit –Life Products - Tax Free –Annuity Products – Tax LIFO on Gains above basis Guaranteed Benefits –All contract features are guaranteed Streamlined Underwriting > 6-8 days!

Sample Client Details 65 female, non-smoker $100,000 set aside for LTC needs Opted not to purchase LTC insurance Has chosen to self insure Normal health Wants to retain control of her money

Benefit 1: Tax-Free LTC Benefit $499,017 Total Income Tax-free Long-term Care Benefits $499,017 Total Income Tax-free Long-term Care Benefits $332,680 Extended Long-term Care Benefits $332,680 Extended Long-term Care Benefits $166,339 Income Tax-free Long-term Care Benefit Max LTC $6,931/month $166,339 Income Tax-free Long-term Care Benefit Max LTC $6,931/month $100,000 becomes $500,000

Benefit 2: Tax-free Death Benefit $100,000 Becomes $166,339 Death Benefit = 2 years of LTC Benefits $83,170 Year 6 $83,170 Year 5 $83,170 Year 4 $83,170 Year 3 $166,339 tax-free Death Benefit 10% Residual Death Benefit of $16,633

Benefit 3: Return Of Premium If the client ever changes his/her mind, provides a 100% lifetime money-back guarantee. Return of Premium Guarantee $83,170 Year 6 $83,170 Year 5 $83,170 Year 4 $83,170 Year 3 $83,170 Year 2 $83,170 Year 1

Benefit 4: Guaranteed Benefits All benefits are guaranteed Carrier cannot: –Raise costs –Ask for more premium –Decrease benefits

Benefit 5: Streamlined Underwriting No Exams, Labs, or Doctor’s Statements Pre-screening Questions 45 Minute Phone Interview 75% of Client who pass the pre-screen questions are approved Total Process takes 6-8 Days

The Process: Simple & Efficient Client Approach – Have they properly positioned their assets for the risks they face in retirement? Data Gathering –Determine client needs and potential sources of funds Case Design –Run Quotes, review options with your Sales Rep –Meet with client and obtain client commitment Pre-Screening Questions Submit Application to Zenith Marketing Group Phone Interview Scheduled by Carrier within 2-3 of receiving app Underwriting decision 2-3 days later

Data Gathering Which assets are not being used for producing income for fixed living expenses? Existing Annuities and Life policy cash values Existing LTCi protection Clients assets Qualified and non-Qualified …What You Need to Know

Sources of Funds Non Qualified Money only CD’s Money Markets Investment Accounts Existing Life Insurance Cash Value Existing Deferred Annuity Key questions to determine if an asset is viable for use in a linked benefit product

The Pension Protection Act of 2006 LTC rider benefits will be income tax free because the rider will be treated as a “qualified” LTC contract after 12/31/2009 PPA of 2006 defines certain tax issues for LTC contracts and for life insurance and annuity contracts with LTC riders (“Combo” or “Linked Benefit” products) –Section 1035 tax free exchange of life insurance for LTC A life insurance contract with LTC rider is defined as life insurance for exchange purposes –Section 1035 tax free exchange of annuity for LTC An annuity contract with LTC rider is defined as an annuity for exchange purposes The use of existing Non-Qualified Annuity and Life Insurance cash values to fund Linked Benefit products via tax free Section 1035 exchanges.

The PPA of 2006 NEW TAX ADVANTAGED OPPORTUNITIES Tax Free 1035 Options: Life  Life / LTC “LB” Product Annuity  Annuity / LTC “LB” Product 1035 Exchange Options: Life  Life Annuity  Annuity Life  Annuity NEW Tax Free 1035 Options: Annuity  LTCI Life  LTCI QLTCI  LTCI ALSO ACCEPTED

What Does The Ideal Client Look Like? Assets available to self insure that are not needed for retirement income Must be insurable, products available for ages Has decided to self insure for LTC needs Wants control of asset should needs change –Wants access to assets – Liquidity May Have said “No” to Traditional LTC Insurance –Wants more than just LTC benefits –Asks “What if I don’t need the LTC?” …Focusing on the Single Premium Sale

The High Net Worth Clients Client Profile Husband, John age 72 & Wife, Mary age 70 Both in Good Health Net Worth of $5,000,000 Situation They have a Survivorship Life Insurance policy in an ILIT with a DB of $3 Million to leverage assets to the next generation. They feel they are well positioned to self-insure for a possible long term care need. –Multiple residences –Investment accounts (stocks, mutual funds, retirement plans….) –$350,000 in low-yielding money funds for liquidity

The High Net Worth Clients Strategy Maximize efficiency in their portfolio. Reposition a portion of the low-yielding assets into a Linked Benefit policy ($100,000 each) $102,426 Tax-Free Death Benefit $307,278 Tax-Free LTC Benefits $134,079 Tax-Free Death Benefit $402,237 Tax-Free LTC Benefits $236,505 of Tax-Free Death Benefit $709,515 of Total Tax-Free LTC Benefits …Plus $150,000 that was not used = $859,515 Result Leverage

NQ Annuities To Fund Linked Benefits Client Profile Jane, Female, age 71; General Good Health; Recently Widowed, No Children Situation Jane’s husband recently passed away. Among her husband’s assets, 4 NQ Annuities with gain and no CDSC totaling $176,000. Jane has no long term care insurance coverage. Strategy To transfer the annuities, via 1035 exchange, into a Linked Benefit Annuity product. Jane will leverage the $176,000 to $528,000 of tax free LTC benefits. –Monthly benefits over $7,000 per month for 6 year

NQ Annuities To Fund Linked Benefits Client Profile Bill, Male, age 55; Excellent Health; Divorced. He has adult children (beyond college) from his marriage. Situation Bill recently had to move his mother to a nursing home. In dealing with his mother’s situation, he has great concerns about his own fate if he ever needs care. He does not want to be put in “one of those places”. He also feels as though his children should never have to worry about paying for his care. A full review of Bill’s portfolio uncovers 2 old life insurance policies with cash value.

Life Insurance Review Strategy To transfer the cash value from both policies, via tax-free 1035 exchange, into a Linked Benefit product. The $100,000 premium deposit provides: –$183,000 Death Benefit (Increase of $25,000) –$549,300 Total LTC Benefits (A monthly benefit of $7,629 for 6 years) Policy #1 (taken out when Bill was a child) Death Benefit: $25,000 Cash Value: $23,000 Policy #1 (taken out when Bill was a child) Death Benefit: $25,000 Cash Value: $23,000 Policy #2 (taken out when Bill was newly married) Death Benefit: $133,000 Cash Value: $77,000 Policy #2 (taken out when Bill was newly married) Death Benefit: $133,000 Cash Value: $77,000 $100,000

Think About It If your clients could SPEND 20 OR 30 CENTS AND OBTAIN $1.00 OF TAX-FREE PROTECTION Wouldn’t They?

“Do one thing every day that scares you.” Can You Commit to Speaking With One Client Per Week? –Asset Repositioning –Extended Care Planning –Get Started Now! - Eleanor Roosevelt

…Yes You Can! Let’s Get Started by working together….

If Not Now, When?! Execution is Everything! Do it, now! Believe in this concept! As always, your clients will listen when they hear your sincerity. Ask your clients “What do you think?” They will be stunned!

“If you don’t like change, you’re going to like irrelevance even less.” – General Eric Shinseki, retired Chief of Staff, U. S. Army

What’s Next? Take stock of the prospects you identified today –What is your sales approach going to be for those prospects? How can Zenith Marketing help? Analyzing your client base with your Zenith Marketing Sales Rep and focus on two areas: –Wealthier Clients aged –Clients aged whose parents have significant assets. "You miss 100% of the shots you don't take." — Wayne Gretzky

Your Customized Action Plan Mining Your Client Database for potential candidates – you should already have prospects. We will develop together a customized case design for each prospect. Commit to working with your Zenith Marketing Sales Rep to develop a sales approach and case design for each prospect. Setting our expectations together, agreeing on timeline and next steps. Following through with your plan – we will help you every step of the way.

Speak With Your Best Clients “Excellence comes from human beings doing things of value that clients find memorable. Remember. You are the only human being in the world who can help this particular client at this particular moment in time.” –Tom Peters

Speak With Your Best Clients… Talk about the need for a review of their retirement security plan. Ask your younger clients about their parents – do they have a plan in place? –This is an excellent opportunity to offer value to your younger client base – they do not want to be left with this burden!

Client Workshops A 30 minute live presentation with your clients – Zenith Marketing Group will provide support as you need it: –Organizing the event –Planning a date –Location: Your office or location of your choice. –Presentation – We will be there to help! Small groups of 5-10 clients

“We have a ‘Strategic’ plan. It’s called doing things.” – Herb Kelleher, founder, Southwest Airlines

Your 8 words or less? Mine would be: “I provide guaranteed security when it’s most needed.” Give your Zenith Marketing Group Sales Representative a call now… (800)

Thank You For Sharing Your Time With Us Today!