Solutions That Leave an ImpressionIn the Wholesale Brokerage World

LINKED BENEFITS

A Two Word Strategy for SecuringYour 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 positionIn 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

0

10

20

30

40

50

60

70

80

90

100

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)Region Median Annual Rate Five Year Annual GrowthUSA $38,220 7%New Jersey $57,300 5%North Carolina $31,950 1%Pennsylvania $34,920 8%Maryland $38,100 7%New York $39,060 6%

Nursing Home Daily Rates (Semi-Private Room)Region Median Annual Rate Five Year Annual GrowthUSA $100,923 5%New Jersey $65,700 5%North Carolina $85,593 4%Pennsylvania $80,300 5%Maryland $110,960 5%New York $39,060 4%

Nursing Home Daily Rates (Private Room)Region Median Annual Rate Five Year Annual GrowthUSA $75,190 5%New Jersey $109,865 4%North Carolina $71,175 5%Pennsylvania $90,338 5%Maryland $83,585 3%New York $116,800 3%

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 PremiumDeath 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

$499,017Total Income

Tax-free Long-term Care Benefits

$332,680

Extended Long-term Care Benefits

$83,170Year 6

$83,170Year 5

$83,170Year 4

$83,170Year 3

$166,339Income Tax-free Long-term Care

Benefit

Max LTC $6,931/month

$83,170Year 2

$83,170Year 1

$100,000

$100,000 becomes $500,000

Benefit 2: Tax-free Death Benefit

$100,000 Becomes $166,339Death Benefit = 2 years of LTC Benefits

$83,170Year 6

$83,170Year 5

$83,170Year 4

$83,170Year 3

$166,339tax-free

Death Benefit

10% Residual Death Benefit of $16,633

$100,000

Deposit

$83,170Year 2

$83,170Year 1

Benefit 3: Return Of Premium

If the client ever changes his/her mind, provides a 100% lifetime money-back guarantee.

Return of PremiumGuarantee

$100,000

$83,170Year 6

$83,170Year 5

$83,170Year 4

$83,170Year 3

$83,170Year 2

$83,170Year 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

Annuity to Life 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 40-80

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 ProfileHusband, John age 72 & Wife, Mary age 70

Both in Good Health

Net Worth of $5,000,000

SituationThey 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 ClientsStrategy

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 ProfileJane, Female, age 71; General Good Health; Recently Widowed, No Children

SituationJane’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 ProfileBill, Male, age 55; Excellent Health; Divorced. He has adult children (beyond college) from his marriage.

SituationBill 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

StrategyTo 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 #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 WithOne 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 50-80– Clients aged 30-50 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 10-20 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) 733-0054

Thank You For Sharing YourTime With Us Today!