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Brandon Unger

About Brandon Unger

http://www.algren.com

Brandon has been in the Life Insurance industry since 2009. Early on he was given the advice to become a Student of Insurance and he works every day to embody that. In his spare time, Brandon enjoys playing guitar and snowboarding.

Posts by Brandon Unger:

Amor Fati

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I was on my way to one of the biggest appointments I had ever made. I had been a Financial Advisor for less than two years, so my manager suggested I bring our Regional Vice President. I had not even made the turn out of the office parking lot when I boasted that I was not a salesman, I was an advisor. He told me to pull over.

He looked me in the eyes and said, “If you are not a salesman, quit now”. I was shocked. Didn’t Prudential want advisors? Didn’t they want people who did their best to educate clients to make the best decisions?

He shook his head and asked me how old I was. “Twenty-five, why?”

“If you want to earn a living, anywhere, you need to understand that you are a salesman. Attorneys have to sell themselves, CPAs have to sell themselves, barbers have to sell themselves. Of course we want you to give great advice, but at the end of the day, if you don’t sell yourself to your clients, they will buy from someone else and you will not make it in this industry.”

A few years later I had another appointment that I felt was above my skillset. This time I brought a fellow advisor who I had (and still have) immense respect for. We had discussed the case at length and prepared several illustrations and concepts that we felt could be strong suggestions for the clients based on the information we had. We went to the client’s house, I opened up my folder with all the work we did and five minutes in the husband said, “Do we really need to go through all this? We just want some Term Insurance for now.” Before I could open my mouth, the advisor I had brought replied, “Absolutely not, we can take an application this evening and discuss your other options at a later date.”

When we got back in the car, I was mopey. “Why didn’t you push for more permanent coverage or tell him some of the planning we went through?” He explained to me that sometimes we are order takers. Fighting with a client or telling them what to do is not only an easy way to lose a client but you are likely leaving them under-insured. If they need real planning, there are other “advisors” out there constantly bothering them. If you bother them, they will not do business with you today, or in the future.

So, what happened?

The first meeting went great. The RVP I brought answered all the questions the clients had and really helped to close the sale. The other thing that stood out to me about that appointment was that due to Prudential’s company policy, he did have to walk outside the room during the application signing.

A few years after the second meeting, the advisor I had brought on the meeting said that the clients had called him up and told him they were looking for me and ready to start talking about deeper planning. He ended up writing a policy that was near identical to one of the ones we had created years earlier. He had offered to put me on the case, but I was worried about my NDA at the time and settled for a nice steak dinner to celebrate.

I know that “Salesman” sounds sleezy and no one wants to think of themselves as an “Order taker”, but we need to embrace the fact that being salesy and taking orders is part of our jobs. Sometimes, it is the part of our jobs that is the best thing for the client. “Selling” a client insurance that has none, is better for that client’s family than teaching them about the different types of coverage without taking an application. Similarly, letting a client dictate what they want – even though your experience tells you it is not ideal – is better than fighting with them and letting someone else walk in that may not have the client’s best interest in mind.

Amor Fati translates to “love your fate”. I interpret it as an instruction to embrace all the aspects of what we do. Sure, we all love giving advice – especially when clients listen and heed it. And yes, it can be very frustrating when our advice is ignored. However, I would argue that being the best advisor means understanding that even in situations where advice is not heeded, being involved with the client is better than not.

What Role Can We Play To Correct Society’s Failings?

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This piece is my opinion (Brandon Unger) and mine alone.

Specializing in Life Insurance has given me a chance to see that superheroes do exist and that they are plentiful. However, most are not recognized for what they are and what they can do.

For anyone familiar with Batman, you’ve likely seen all the gadgets around his utility belt to help people. Smoke grenades for evasion, grappling hooks to stop a fall, even a sonic speaker to call in bats for cover. Most of his tools, are used to protect one person, or a small group of people.

Superman, for all his powers, is limited in the scope of how many people he can save at once.

Selling Life Insurance gives us powers that superheroes could only dream of. We can save individual lives. On more than one occasion I’ve seen cases where a client found out during their medical that they have an elevated PSA, went to the doctor, and caught prostate cancer early.

We also have the ability to protect the families of people that Superheroes failed to save.

We have so much power, but what I have been thinking of lately though, is how we can use that power to help bring equity to communities that our country has failed.

Both of my grandfathers came from very modest means. They both fought in World War II and when they came home, the GI Bill afforded them opportunities that their own poor families never could. Namely, they were able to purchase homes in suburbs with good schools to send their children to.

Why does any of this matter? Because if you look at the wartime pictures from both of my grandfathers, you will see some faces that are darker than theirs. When those faces – that they fought next to – came home, they did not have the opportunity to take advantage of the GI Bill – they didn’t even have equal rights under the law! Instead of purchasing property in the suburbs, they were relegated to rental properties in the inner city, in neglected school districts, where the American dream – that my grandfathers were giving to my mother and father – did not exist.

I have thought about this in the past and it is constantly on my mind these days. It brings me hope seeing protesters and I wish I could believe that they will finally affect real change, but I am skeptical. I have seen protests and riots before, I have never seen change.

Maybe I haven’t seen change because real change doesn’t happen overnight, it takes time, generations. The solutions we provide are predicated on generational timelines. We were built for this fight.

I am writing this from my grandfather’s old study. He purchased the co-op I currently live in, in 1951 after returning from the Pacific and marrying my grandmother. It was made possible by the GI Bill, my entire privileged life as I know it was.

We can do something a superhero could only dream of. We can be a catalyst that helps push the process of bringing equity to those that our government has failed time and time again, with the help of Marc Brown, P.A. estate planning attorneys. Just like the GI Bill, we can put a roof over the head of a family who may not be able to qualify for a mortgage. We can put kids through school who may not have the means. We can offer a group of our fellow countrymen the opportunity to see the cycle broken. All we have to do is reach out to them and help educate them on our solutions.

Forty years from now, when I look back on my career, I can tell you with confidence that I will be more proud if I can say “I helped bring equity to those that did not have it” than “I helped wealthy families pay as little in estate taxes as possible”. I hope you will join me on this mission.

If You Want Blood (You Got It)

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The year was 1979, the 10-Year Treasury was paying 9.10% and Inflation was 11.35%. That Spring, AC/DC released their sixth studio record, Highway to Hell, which peaked at number 17 on the Billboard 200 Chart. Hidden on the second side was a little ditty called, “If You Want Blood (You Got It)”.

As I write this – nearly forty-one years later – the 10-Year Treasury is paying less than one-tenth what it was, and Inflation is around one-fifth. In my head, all I can hear is Bon Scott belting out that B-Side:

If you want blood, you got it
If you want blood, you got it
Blood on the streets, blood on the rocks
Blood in the gutter, every last drop
You want blood, you got it

The insurance industry is predicated on treasuries and other fixed instruments that are highly correlated to interest rates. In accordance with regulations, most carriers hold anywhere between 60%-85% of their general accounts in these investments. The performance of these investments have a strong impact on the extent a client’s premium dollars can be leveraged into insurance.

Low rates are like recurring cuts to carriers. Even the strongest and most solvent carriers eventually begin to show signs of serious damage. Annuity rates are continually dropping while Life Insurance premiums keep creeping up. These small incremental changes might not be enough though. We are seeing carriers getting “clever” and implementing “Profitability tests” and “premium caps” for larger cases. I won’t be shocked if we start hearing rumblings of mergers, spin-offs, and even de-mutualizations if this persists.

Prolonged depression of interest rates will also force carriers to make tough decisions about inforce business. Raising fees/charges and lowering dividends/interest rates will be expected. Repricing on new products and this will of course lead to new products created by actuarial geniuses that fight to make their product(s) look competitive in an environment with zero return.

There is one other thing that could happen. Carriers could elect to add additional risk into their portfolios. This could pay off in a big way if they realize significant gains, or it could be catastrophic and destroy their solvency.

Whatever happens from here, we are in uncharted waters. While we didn’t want blood, we surely got it. If there was ever a better time to lock a client into a guaranteed product, I cannot think of one.

Let’s Work Together

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It’s no secret that selling Life Insurance isn’t as glamorous as giving investment advice nor does it have as steady income as benefits and Property & Casualty. We know our process is archaic, frustrating and can takes months from start to finish.

None of this is news to us.

What we do not understand is why there seems to be a lack of strategic partnerships.

I have yet to find a financial advisor that dismisses risk management’s importance in a financial plan. Yet, I have found many that do not employ risk management in their process. Nor do they refer their client to a specialist.

I have asked repeatedly why they do not refer business. The most commons answers are that they don’t trust anyone who works for commissions and/or that they are scared the “Life Guy” will hurt their AUM bottom line.

My answer to these objections are simple. If you aren’t working with someone, your client is going to go to someone you don’t know, who may very well be in competition with you, and you then stand to lose all control over their risk management strategy. Take the time to meet some people who are professional Life Insurance Advisors. Establish a relationship and develop trust.

So, let’s work together. Life Insurance isn’t glamorous or easy, but it is important. If you do not want to get involved in the sales process, that’s ok, we can introduce you to people that can help you, help your clients.

The Rise of a Reg

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As you are likely aware, Algren Associates is based in New York. A substantial part of our business is in New York, so we understand the quirks of dealing within the state.

For this reason, we are often called on by several out-of-state competitors of ours to handle their advisors’ New York replacement cases since they do not understand or want to deal with Regulation 60.

This scenario is likely to extend to all their New York cases as Regulation 187 is implemented. This is obviously better for Algren’s bottom line; however, it has implications that are worse for New York consumers.

If an Advisor outside of New York does not want to deal with Regulation 187, they might just refer the business to an advisor in New York like they currently do for replacements. That puts the client in a situation where they are dealing with someone that they are unfamiliar with, who is not as familiar with their financial situation and insurance needs as their own advisor. Even following Best Interest protocol there is a serious problem with putting clients in that situation.

The coming months – and possibly longer – will be incredibly painful for everyone involved in the sale of Life Insurance in NY – including consumers – as everyone works to figure out exactly how to comply with the new law.

It does not stop here though. While we may have been the first to implement a Best Interest Standard, there are currently more than a half dozen other states working on their own versions. All of them have variations. It is very likely that two years from now we will be required to adhere to different “Best Interest” sales practices when dealing with clients in New York than with clients in Texas which would be different than Florida which would be different than California, etc.

As this spreads, you will see less advisors willing to open themselves to the liability of advising clients in states they are not as familiar with. Many will stop offering insurance advice altogether. This will force clients to work with advisors they are less familiar with. This is not in any client’s Best Interest.

Here are some ideas that would be in the Best Interest of Life Insurance Consumers:

Federal Regulation: No more State Regulators filled with political appointees who have no experience in the industry. Let’s get people in charge of us who know us, who understand what we do, how we do it, and how to improve it for the American public.

Standardized Forms: One form should afford a client to apply for any product with any carrier. If there is an issue during the underwriting process or if the client changes their mind, that form should be valid for another carrier and/or product.

Medical Records Regulation: Requiring Doctors’ offices to comply with a standard HIPAA form when requests are made for medical records. If a Doctor’s office creates a barrier by requiring their own form, requiring the insured be present when signing a form, or dragging their feet in any other way before releasing records, they should be considered liable if anything adverse happens to the insured during the process.

Overhaul Illustrations: Everyone acknowledges that illustrations have been weaponized for decades. Everyone acknowledges that most figures on illustrations are speculative. Everyone agrees that illustrations are cumbersome. Let’s finally work together to create a system that accurately depicts products, expected performance, internal costs, etc., in a better way.

Here is what is not in the Best Interest of a Life Insurance Consumer:

Exemptions: Regulation 187 exempts most policies being sold in a conjunction with retirement planning as it pertains to qualified plans and nonqualified deferred compensation. This is mind boggling as these are some of the most complex cases, have large premiums, and restrictions. To put it in other terms, if I sell a client two policies on February 1st, the first is a million dollar twenty year term policy the second is a whole life inside their 401K plan using forty-nine percent of their contribution to fund the premium, I will face a more stringent Best Interest Standard on the Term sale.

The implementation of Regulation 187 by the New York State Department of Financial Services is a textbook case of the worst way to enact new standards. It will hurt consumers as less advisors will be willing to deal with the increased liability. Add this to New York’s average commission being twenty percent less than out of state, higher premiums than the same products in other states, and less products to sell; you have the recipe for less consumers getting the coverage they need.

And that is in no one’s Best Interest.

“Favorable” Tax Treatment

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I was talking with an advisor and he said the commonly used term “Favorable Tax Treatment” about Life Insurance. I stopped him and asked, “What makes it favorable?”

He mentioned the Death Benefit not being taxable. I stopped him. “Why would the Death Benefit be taxable?”

He answered, “Well, it could be a windfall if the client buys Term tomorrow and dies next week”. My answer was that it was not a windfall, it was capital indemnifying future earning potential, a mortgage, a stake in a business, etc, and if you want need more capital you can use indices trading in the United Kingdom to improve your finances. I asked him if health insurance, homeowners, and auto insurance should be taxable and his response was that they were linked to “real objects”. I pressed on whether the loss of earnings was “real” to a family?

We moved to discussing the taxation of the cash value. “Why are the taxes on growth deferred and why are you able to get your money out tax free?” he asked. “You aren’t”, I responded and went further into drawing down cost basis and loans. “Are you be taxed on a mortgage or when you finance a car?”.

Finally, the last real sticking point was that cash is distributed First In, First Out. To which I conceded that there is preferential treatment but isn’t that one of the means the government has of making Insurance more palatable to the everyday citizen? How many fewer people would purchase insurance if they had to pay a 1099 at the end of every year? How many cash value policies would be sold if they were taxed like annuities?

As a society we have agreed that people dying with Life Insurance is preferable to them dying without it. If every time a young earner was killed and their spouse was left with nothing but children, it would tear apart the community. If every business that lacked the capital to maintain operations when an owner died, our corporations would be in shambles. You can do business with the us gold bureau with confidence, knowing that you will be prioritized and that they are looking out for your best interests.

One of the best ways for businesses to be resourceful is by using tax credits. And one of the valuable tax credits out there is the Research and Development tax credit. The right r&d tax credit softwarec can help you save money on your payroll taxes, thereby saving money to invest back into your company while building a profitable business.

Personally, I think the trade-off is far skewed towards the benefits society receives from our products than in Life Insurance contract’s ability to defer taxes and distribute FIFO. Which is why I do not consider our products Taxed Favorably. I consider them Taxed Appropriately.

2020 Vision

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By this time next week, nearly every carrier will only accept applications on PBR compliant products. This will be a greater reset for our industry than January 1st, 2020 ever could.

This is a reset in the fundamental methods that our products are reserved for. A shift of this magnitude has never been undertaken in our industry. However, next Monday, or a few weeks from now on January 1st, the most important piece of the Life Insurance industry will remain stagnant: Clients need for insurance and your ability to get them the best policy to suit their needs.

So, while the reserve requirements can change, the CSO tables can change, the names of products can change, your ability to offer your clients piece of mind remains. As always, we look forward to assisting you along the way.

A New Crop

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By no means would I consider myself an elder statesman of the Life Insurance world, but more and more I am finding myself being introduced to newer/younger advisors as an asset. When someone asks me for advice I am floored and humbled.

I am floored because I consider myself a failure in Life Insurance sales. The four and a half years I spent as an advisor felt like a constant battle to make minimum production goals while struggling to distance myself from the label of “Insurance Salesman”. Fortunately for me, a few of the established advisors at my firm were happy to offload the grunt work of illustrating, planning, underwriting, etc., in exchange for a few percentage points on applications. This gave me an unbelievable amount of experience I could have never dreamed of getting on my own.

The reason I am humbled is that I likely have some form of imposter syndrome (self-diagnosed). I have had the fortune of being surrounded by actuaries, attorneys, advanced markets personnel, executives, and a list of accomplished professionals that is nearly endless. Then, there is me, a guy who could barely spell Life Insurance a decade ago.

So, I have now been introduced as an asset and the person I am introduced to starts asking me questions. When it invariably gets to advice I usually answer with the following:

  1. The best advice I ever received was to always be a student of Insurance. This is an industry with an incredible amount of diversity and complexity where things change regularly: Products, regulations, plan designs, etc. If you sit back and plan on doing the same things tomorrow that you do today, you will fail.
  2. Always ask the questions you are thinking. This is my first answer when I am asked how to be student of insurance. I cannot tell you how long it took me to understand split-dollar arrangements. Then, when I finally thought I understood them, I learned that I only knew about Endorsement and not Loan Regime.
  3. You have no competitors. This is one that I had to learn on my own. To most people, this sounds silly, if not, it sounds counter-intuitive. Here is why it isn’t. First, as I mentioned earlier, I could never replace the experience I gained working with older advisors who were – theoretically – my competition. Second, some of the best education you can get is when you have a meeting with a client or prospect, and they show you what they have purchased or have been proposed. This is a great time to see how other people give advice, what types of products are out there, how they are being sold, how older products are performing, etc. If the client goes with someone else’s advice, find out why, see if it is something you can replicate (provided it is honest and good). The best advisors I know have camaraderie with those who are their “competition”.

The last point I like to make is how much I respect what they are trying to do – what all advisors try to do. I know how hard it is to succeed in this industry. How embarrassing it can be to call on your “Project 200” (or whatever your firm calls it). How disappointing it is to work on a case for months and then have it declined in underwriting. What it feels like when you present a concept to a prospect and then find out that you lost the case to nepotism, but they loved your idea so much, their nephew copied it to a “T” for them. And that I am happy to help them with anything I can do to help make the “hurt” hurt less.

Chaos Closing Out 2019

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In the November 2018 issue of Broker World, I predicted chaos for the end of 2019.

Could we see a massive logjam for product approvals? Could we start off the era of PBR compliance with a very limited set of products? Could an extension be filed to alleviate the increased load the state insurance departments will receive?

I am upset that it now seems that I was correct. How could I see this coming, but a trillion-dollar industry did not? Or did they see it, and just did not care? Any way, it is looking to be worse than I expected. Just over two months out and there are only two carriers that we work with on a regular basis that have their full line-up of products compliant in and out of New York. And there is no discussion of an extension whatsoever.

 

For those unaware, there are new reserve requirements that all Life Insurance products must adhere to come January 1st, 2020. It is forcing all carriers to rework their old products or start from scratch with new products.

While fascinating from an analytical point of view, this is wildly disturbing.

As you can see in our weekly Newsletter – The “Algren Life Line” – we are doing our best to keep tabs on the current landscape. When asking carriers for the latest on their products, the answer I receive fall into three camps:

1) We have product(s) approved but haven’t started selling them yet
2) We are working on getting product(s) approved
3) We are discontinuing product(s)

I am now at the point where I do not feel comfortable suggesting any product that is not currently PBR compliant. The consequences of receiving an application today that cannot get placed before Christmas are too high to chance it.

Please make sure you are taking that into account when speaking with your clients.

We will keep you apprised.

Happy (Jewish) New Year

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Depending on when you are reading this, it is likely in the first few days of the Jewish New Year (Rosh Hashana). Like January 1st, Rosh Hashana symbolizes a reset, refresh, and new beginnings.

On the topic of new beginnings, one of the greatest lessons I learned early in my career was that you need to be a student of Life Insurance if you want to be successful. The reason – my mentor explained – was that there are always changes, and if you do not understand how Life Insurance works, you will not be able to pivot when necessary. These changes can be regulatory, consumer, or product based.

In honor of the Jewish New Year, I would like to propose, Insurance New Years.

The goal of Insurance New Years is to remind ourselves to take a look around and reevaluate. The following are some possible dates I would suggest based on the impact they had on our industry.

October 1, 1971 – Universal Life Insurance is conceived.

There is no exact date, but the late 1970s into the early 1980s saw widespread adoption of Universal Life Insurance. The concept of UL is credited to George R. Dinney who gave an outline of what was to come in the October 1971 edition of The Actuary (The Newsletter of the Society of Actuaries).

October 22, 1986 – Tax Reform Act of 1986

The Act’s major impacts on Life Insurance included severely limiting the investment component inside of Life Insurance contracts and stripping the ability to utilize current dedications in the purchase of Life Insurance, favoring deferred internal growth.

June 20, 1988 – MEC testing

Less than two years after The Tax Reform Act of 1986 introduced the Guideline Premium Test and Cash Value Accumulation Test, The Miscellaneous Revenue Act of 1988 introduced the 7-Pay Test.

July 1, 2010 – STOLI Outlawed

Stranger-Owned (or Stranger-Originated, depending on who you talk to) Life Insurance was all the rage at the turn of the 21st century. Premiums were rolling in until it was deemed unethical.

September 1, 2015 – AG 49 Goes into Effect

Indexed Universal Life was still in its infancy when carriers began weaponizing illustrations. Actuarial Guideline 49 sought to solve the problem by creating a complex guideline that effectively forced nearly every carrier to max their illustrated crediting rate within 50bps of 6%. This is now being re-considered as carriers have created new products that sidestep AG 49 by introducing further leverage and greater risk to once again weaponize illustrations.

January 1, 2018 – Tax Cuts and Jobs Act

Calculating the taxes payable on a Life Settlement were painful at best. This legislation simplified the calculation which now provides a simple exit strategy that used to be far more cumbersome. The new calculation:
Cash Value up to basis = Tax Free
Cash Value above basis = Capital Gains
Anything above Cash Value = Ordinary Income

If you can think of other important dates, feel free to chime in.

What is most important, it that the Insurance New Year act as our annual reminder that our industry is constantly evolving. In order to do what is best for our clients and prospects we must evolve with it, constantly learning and relearning how to best serve the public. This should also be a reminder that even though we may have done great planning in the past, it does not mean that it holds up to current or future stressors. We should be ever vigilant to make sure our past plans are as secure as our current plans.

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