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Bob Kerzner is a passionate advocate for the life insurance industry. Since 2004 he has been the President & CEO of a world-wide organization dedicated to providing its nine-hundred member companies investigate value-added marketing and distribution expertise. As Kerzner describes it over its ninety-year heritage LIMRA has become the repository for all of the life insurance industry’s knowledge and investigate. Kerzner offers us some valuable insights in this wide-ranging converse including comments on the insurance industry’s future role in Boomer retirement. Macchia – To begin. Bob and before we move into the LIMRA discussion. I think people would be interested in knowing about Bob Kerzner the executive. Would you be kind enough to talk about how you came into the financial services industry how that began and the steps that led you to your current position as President and CEO of LIMRA? And yet an opportunity came my way that I absolutely open fascinating. It was in fact an opportunity to change life insurance in a different way working through independent agents and working with their best wealthy clients. Once I got into it. I found out that I loved it—that it was an intense business and one that would allow me to be creative in helping populate find solutions to complex problems using a unique financial tool. I worked for one affiliate for 30 years–working my way up from the lowest field sales position to field management and ultimately running the entire life insurance division with both top-line and bottom-line responsibility. I really had a wonderful go. Macchia- Your answer reminds me of something perhaps because it’s reflective of my own accent. But I’ve always believed that people who entered the business through the door of sales people who have had real experience at the sell level who understood the dynamics of prospecting and presenting to sell clients and all that that implies that such populate acquire what amounts to a life-long advantage in terms of how they are able to bear on their knowledge and skills of the business no matter where their careers may take them. I wonder if you buy into that? Kerzner- Unequivocally. My experience in the field–having the experience of actually sitting across a table from a potential customer and trying to convince them that our product could solve a problem –gave me a unique perspective when I was running the division many years later. I don’t think that there’s any other way that you get that kind of perspective. And frankly one of the saddest things today is that very very few of the most senior people – the CEO roles in our industry – are coming from the field. We’re certainly seeing less and less. And I do think that you get a very different point of believe as you say that stays with you forever. Macchia- A relevant analogy can be found again in terms of my own experience in which I describe my having had a leg in each of two separate and distinct ponds. Meaning the different experiences of the world of agents and distribution the salt water pond and another set of experiences having to do with he business challenges of product manufacturers- the fresh water pond. I observe that it’s rare that these two ponds meet and the water becomes brackish. And because they do not meet come up it’s seldom that there is genuine understanding of each other’s challenges and frustrations and it’s rare that meaningful communication exists between the two populations. Do you accept with how I see it? Kerzner- Well from my viewpoint I see it slightly different. We’re creating a product in our business that’s very technical. It must be passed through 50 different states often the SEC and the NASD which will care about how you change it. During the development process it’s easy to get wrapped up in the complexities and lose sight of the consumer’s needs. First and foremost. LIMRA is about research. For ninety years we’ve been the repository for of all the industry’s knowledge and research. Generally speaking when somebody reads a report about insurance or suggests that somebody’s number one in the industry they’re usually referring to LIMRA’s benchmarking of the industry. We also do a lot of the forward-thinking research about where the business is going. We’ve certainly been conducting more consumer research to try to understand how people see our industry and think about our products; and what motivates people to buy or not to buy our products. We’ve expanded abroad. We’re now in 64 countries worldwide with more than 800 member companies. We’re now training in emerging markets in Eastern Europe as well as throughout Asia on ways to regenerate distribution and increase productivity to help companies be more successful. Kerzner- Yes. We are owned by our members. They fund all of the research but I should mention that we also have businesses that are not part of our 501 C(6). We have a wholly-owned subsidiary that provides an array of services to the industry. For example for 65 years we have done the testing for companies to determine who is most likely to change state successful as a producer. Today we do similar testing for a be of fortune 100 companies including leading stock brokerage firms. We’ve become significant in the compliance business. We help provide shared solutions to the industry designed to communicate real problems companies are facing. Beyond the research we conduct an arrange of other activities such as consulting with a strong learn in compensation planning. And. David. I think I’d be remiss if I didn’t mention one more thing that is really at the core of LIMRA and that is networking. We run a broad spectrum of conferences and committee meetings throughout the year where people who overlap the same roles and responsibilities can talk about and share best practices overlap ideas and really get to know one another. That’s a really important aspect of LIMRA. It’s where the industry meets. Macchia- Let me ask you about another issue which may become very important in LIMRA’s future and that is the idea of a merger between LIMRA and LOMA. I presume that the decision to feature LIMRA and LOMA comes out of an analysis that defines synergies and benefits arising out of such a combination. Will you talk a bit about LOMA’s work and then exposit the benefits you see resulting from such a merger? Kerzner- This is really an idea whose time has go. It’s been looked at in the past and for a variety of reasons the timing was not right. LOMA is clearly in the education business. While we have educated the handle. LOMA has been the major educator of the Home Office staff. Their FLMI designation within the back offices of companies is really the designation the gold standard. It is the training the broad knowledge that industry professionals want. Both because of the depth and breadth of that training and because it actually helps them do what they do better. LOMA runs conferences just as we do but often there’s more of a technology or efficiency cerebrate. So while we do many of the same things we do them in different parts of the organization. Coming together helps us act compassionate of the totality of these education needs. A combination is also greatly complementary. They have built a great e-learning platform. We have not done that. Why should the industry pay for two e-learning systems? The benefits of merger are that the industry could have for the same capital outlay a much broader capability to serve the entire life insurance company. So those are just a few of the highlights. Macchia- Bob. I’d desire to shift to some challenges and opportunities facing life insurers. As you experience I am a creature of the insurance business having begun in 1977 as an agent at the lowest rung. I very much value the 30 years I’ve been associated with this industry. I’ve had opportunities and financial rewards beyond anything I could have hoped for including an excellent education. So as someone who has gained a lot from the industry I’m an advocate for its beat interests in the future especially in terms of the Boomer retirement opportunity. I often times think however that life insurers are not likely to arrive their fullest business potential unless and until some of the most intractable challenges and problems that direct back its growth are first identified and then dealt with and eliminated so that the industry can set itself up for robust growth. In my opening remarks. I will take a clip of a mention made last year by the president of a study mutual fund company who charged that the life insurance industry is going to blow the opportunity because they undergo not been very good at execution. Ironically that mutual fund company is owned by a life insurance affiliate. So. I thought it was a particularly interesting statement. We took it seriously enough that we built this year’s program around the concept of execution. What does our industry have to do to capture their fair share of that opportunity that everybody knows is the biggest in history? A couple of the things that are important to be at: First many companies are too siloed to look at the total needs of the customer–we don’t spend enough time as some other parts of the financial services industry to really understand what the customer wants how they think. Although we certainly think that LIMRA can play a role in that piece. Second there’s a lot of discussion about whether we take too much of a product focus. The industry often takes a manufacturing view. Is that the best approach? Third is an issue that LIMRA talks about—it’s move of who we are our fabric— and that’s distribution. The number of producers continues to change state in terms of career agents. The number of new agents continues to change state. So will there be enough distribution to meet these needs? And if not which we believe is a certainty what will the new avenues be to get our products in front of populate more often? Macchia- What’s you’ve articulated here is in my day-to-day wheelhouse. Let me begin this by telling you that one of the reasons that this blog was started was to try to galvanize the attention of industry leaders to some of the very challenges you’ve just mentioned. One of the issues that I’ve written about extensively is reflected in my own experience where 30 years ago I entered the business at the end of the evaluate book era and then saw that the introduction of the PC began to change things rather dramatically. It became easier for agents to assess the relative benefits of different companies’ products whereas previously they may have been focused exclusively on a hit company’s products. And this led to a study shift in the way producers work which has led to today’s reality that most agents are independent agents. As this change took root the insurance companies tended to revert to a stance where the concentration was increasingly on manufacturing products rather than developing producers. The intensive training and education that was once routinely provided was in many cases eliminated and agents transitioned from career agents to what might be termed “remove agents.” And I would argue that this is one of the most significant reasons that the industry is plagued by a poor public image and poor sales practices. I wonder if you buy into that historical chain of events and its leading to some of today’s problems? Kerzner- Yeah… ah… unfortunately. I think that there’s a missing piece in what you’ve suggested. We undergo created a copy that actually talks about the natural events that occur as a merchandise emerges. What I can tell you. David is that virtually all countries mouth with a very strong go agent system and over time alternate distribution begins to enter. Part of the issue is that somewhere along the line products begin to become much more sophisticated producers may well not be trained adequately sales practices become aggressive and issues emerge around mis-selling. Now I should be clear that this even occurs in alternate distribution. So it’s not just agents. Those practices tend to arouse tighter and tighter regulation. There tends to be a scandal resulting in poor public image and then ironically it tends to become more difficult to register more people because now the job is harder. Anyone today who has to go through the myriad of 30-page proposals. 200-page prospectuses and all of the rest can certainly see what happens as products become more complex like they do in a develop merchandise. But you can’t just lay that at the affiliate doorstep. In fact unfortunately the actions of producers whether they are career agents or populate working for financial institutions help to create this problem. Macchia- You know. I evaluate that’s fair. But don’t you also think there’s something more? As career agents have increasingly become independent they have also become more increasingly underproductive than they were in the past. For instance when I was a young agent I was expected to achieve at least one sale of life insurance per week. And some of the veteran agents completed two or change surface three sales each week. This is phenomenally more productive than today’s agents achieve. As low productivity has taken root among the agent ranks there’s a natural tendency to desire out products which pay higher levels of commissions on each individual sale. And so you have the emergence of a viscous cycle where companies are more reliant on independent agents to a greater extent than ever before and they attempt to placate the agents’ desire for higher and higher compensation which leads to less and less consumer determine in the products and to an ever-increasing negative public image. This creates a vicious cycle which is difficult to break. Do you see that? Kerzner- Well yes but once again let me cite some LIMRA data. In fact over the past 30 years the number of policies per year sold–hence the number of families we touch–has consistently declined every year proving your point that agents undergo change state less productive. However producers at the same time are selling a total be of life insurance premium that continues to escalate. So what I would suggest the data says that be one agents undergo gone upscale and undergo continuously moved more up-market selling fewer but larger face-amount policies. Second as you are well aware agents are selling a much broader arrange of products than 30 years ago. They can sell annuities mutual funds- and life insurance. So some of that decrease in productivity has to do with the producers’ ability to get to their income objective by selling investment products which are easier. Certainly when I was President of the broker-dealer. I saw that when annuity sales skyrocketed life insurance sales often went the other way. So I think. David that today producers can get to their desired income aim in different ways. Macchia- Let me jump into another assertion I make which may be off-putting to some but it’s something I believe to be true after many years of personal observation. And that is that the life insurance industry- somehow- simultaneously develops both the world’s finest sales people and the world’s worst marketers. And that the poor quality of marketing accounts to some extent- and maybe a large extent- for many of the industry’s contemporary challenges. Would you agree with this assertion? I actually am optimistic in that in the last 12 months I’ve seen a difference here. If you look at a number of companies and how they are positioning themselves in today’s environment you see improvement. I even played segments of a be of companies’ commercials at one of our conferences last year to show how I felt that they were doing a far exceed job of marketing on image on outcome and on getting populate to think about the kind of retirement and lifestyle they want. I think that they are doing a much better job than a couple of years ago. There’s even one company that’s doing an outstanding job of creating emotion around our products getting to the core triggers of why someone buys life insurance. So I evaluate that the companies are getting exceed at marketing. Macchia-I’m glad to hear that because I believe that to a great extent the emotion component has been what’s missing from so much of the industry’s marketing initiatives. I’m happy that this is starting to happen now as the Boomer retirement opportunity begins to unfold. And I’d like to act our conversation in that direction if I could. I say ill-conceived marketing and positioning because over recent years the VA product was showcased as an alternative to other investments such as mutual funds. This invited criticisms over comparative cost structures not to have in mind unfavorable income tax comparisons. Now with the recent refocus on guaranteed withdrawal riders it seems the variable annuity product can be re-characterized repositioned as what it really is- an insurance vehicle capable of delivering a set of benefits that can be extremely beneficial to populate needing a guaranteed baseline retirement income. I wonder if you see the issue this way. Bob in terms of my belief that there’s been an historical mistake made over the product’s positioning and that now there’s an excellent opportunity to re-focus the insured aspects of the VA contract? And that these insured benefits have costs which are justifiable? I anticipate what I’m saying is do you see this as a timely opportunity to correct past mistakes and set the stage for growth in the VA line? Kerzner- I evaluate that there are a lot of complexities in that proposition. Let me go at it this way. I was in the field. I used to talk with a client about the two lives of an annuity- the pay-in period and the pay-out period. I tried to make absolutely certain that clients understood that one of the significant advantages was the tax preference during the build-up years and that they really understood why that was a benefit. And in the early years that certainly was a key component of what got us the attention–the fact that you could get those gains in the merchandise you could supplement your retirement savings … and it was a good forced savings vehicle. We spent hardly any time regrettably—and this is where I evaluate we made the mistake— in talking about what annuities do best in terms of the pay-out arrange. When we hit the downturn in the market many were concerned that variable annuities would suffer a precipitous displace in sales. And here’s where I would act a slightly different perspective and say that I think the industry did a great job of determining what it is that the consumer really wants. LIMRA data suggested that more absolute certainty is what the consumer wanted. What people love most about our industry is our guarantees. But also during that period. I believe companies—because of the downturn—did a much better job of making people understand that the death acquire really was extremely valuable. I’d agree however that there was a period of time that we didn’t sell that benefit come up and didn’t make people understand its true value. Let me conclude with this. The industry has enjoyed seven consecutive quarters of record-breaking sales of variable annuities. That’s in large decide due to the creativity to the improvement in positioning and the creation of these riders which gave American consumers more of what they said they wanted. Macchia- Well I agree with much of what you say. And you should know that I’m a strong advocate of the variable annuity. I accept it’s underutilized. But I would… not challenge… but remind you of the fact that while sales growth has been obvious there are still inherent weaknesses in those results in the sense that approximately two-thirds of those sales derive from 1025(a) (1035?) exchanges and we comfort have a situation where four fifths of advisors shun the variability annuity contract. And to me this goes back to historical ineffectiveness on properly positioning the product. This is the challenge going send in my judgment. We’re talking about a unique type of product with a solid and valuable acquire coordinate but minds undergo to be changed. And often the insurance business doesn’t get the benefit of the doubt… Kerzner- And I think. David we absolutely agree and I’m not suggesting we can’t do much exceed—that there isn’t tremendous upside opportunity and that there doesn’t be to be some different alternatives made available—to get those other advisors in the bet. We also have to do a exceed job of using the product with younger clients in their forties as a systematic drive for savings. Kerzner- And that actually gets to the next topic of Boomer retirement where the ultimate war will be won or lost by each segment of the industry. It is about retaining the asset. That is the next battleground and frankly the one for the next 20 or 30 years that really matters a lot. Clearly annuities’ furnish the potential to provide periodic payouts like no other financial vehicle can. And therein lies one of the great opportunities and still unresolved challenges for our industry: can we be the one to really get the income arrange alter? To take advantage of the unique structural financial leveragable opportunities- and all that we do best- to really interpret our overlap of the assets in the payout phase? Macchia- That’s the key question. I evaluate you’re exactly right. There are many elements to answering that question. Communications is a big part of it technology is a move of it competition is a move of it. Let me cerebrate on competition. In the current issue of National Underwriter there’s an article written by Norse Blazzard and Judith Hasenhauer which talks about copycats eying the development of variable annuity type features. Here’s a ingeminate: Most likely every major investment tighten is busily working on providing a GMWB to customers by mutual funds managed separate accounts and change surface avoid funds all without requiring the clients to become involved with a VA.” I also recently noted an article which addresses the growth of structured products. And I’ve written myself about structured products and the fact that large asset management firms which have traditionally aimed structured products at the institutional markets are now aiming them increasingly at the high net worth market and potentially the crowd merchandise with intention of replicating some of the core benefits found in traditional annuity contracts. In a recent interview at this Blog I asked Professor Moshe Milevsky about this very air. Moshe predicated that within two years we may see a dozen major new players- in terms of major asset management firms- coming to market with structured products for consumers that target what is inherently and traditionally the insurers’ playing field. I wonder if this is something that you and LIMRA think about and what the impact of new competition may pose in the way of challenges for life insurers? Kerzner- Yeah it’s a great challenge and it’s something that we evaluate about a lot. We have begun working on what we call arrange Five which predicts the future of the industry. And in fact what we say that it is highly likely that there ordain be other new players—different forms of competition—than exist today. We also did another study with a group called DSI which is linked to Wharton and we looked at four possible future scenarios of what the life insurance industry could look like in 2016. The two major axes that we thought would alter most the future of the industry were first. “will there or will there not be high demand?” And second. “what ordain the environmental climate for competition be?” In the last five years we’ve begun to use dynamic hedging. We’ve used financial tools from other large financial institutions that have made many of these guarantees that we’ve associated with our products possible and have made their success. Others who hive away assets are envious of our success and will be to emulate what we’ve done successfully to broaden their offerings. Americans have demonstrated that they are willing to pay an extra rush for that guarantee. So I do think that you are going to see new forms of competition from non-traditional sources. And as I say this is one of the things that we are talking about and predicting. It’s highly likely. I accept quite strongly- and have stated publicly- that the high stakes business opportunity wrapped around Boomer retirement will prove to show winners… and losers. And to an extent-not exclusively certainly- but to arguably a significant extent- the winners will not be those with the so-called “beat product” but rather will be those which excel at compliantly communicating their determine to a large and fluid marketplace. I wonder if you agree with this assertion? Kerzner- I’m not at all suggesting that’s not important but I evaluate there are a bring together of other issues. Number one. I believe that innovation is important. If you be at the leaders you’ll note that they are often very early to merchandise with study innovations and are constantly innovating. The bigger companies that are well positioned and are innovative will be the most successful. That’s one of the things that will be important. I comfort accept that distribution is critical. The companies that have the beat distribution will have one of the important keys to success. And finally this issue we talked about earlier- execution- is important. Who ordain be able to put all the pieces together and mouth across a platform? I’m not suggesting that communications isn’t crucial because as you pointed out more of the producers are independent. You’re going to have to communicate why you’re better how you’re bringing more value. Not just to consumers but also to other distribution channels—and in a way that’s superior to competitors. Macchia- I think that’s very fair. I want to ask you about a quote that I saw recently from Mark Timergien of Moss Adams who made some comments indicating that there’s going to be far too many consumers for the amount of available advisors. He also stated that 70% of the industry is made up of solo practitioners who don’t be to grow. I query what changes you envision that may undergo to appear for companies to get to the effective distribution that you just described as being so important? Kerzner- In fact we just completed and released joint work with Mark and Moss- Adams on this very affect last week. We believe distribution will undergo to be substantially different in the future. That doesn’t mean that existing distribution goes away—but I will communicate at length at our annual meeting about why we believe that technology is a game-changer. We expect technology will have a material change on how distribution could be in 5 to 10 years. Just like we couldn’t undergo envisioned the force that the iPod would have on the music industry. I think we could see distinctly new forms of distribution because of technology. Technology that makes the ability to purchase our products easier as well as technology that allows us to get our message to consumers in new and different ways.

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Bob Kerzner is a passionate advocate for the life insurance industry. Since 2004 he has been the President & CEO of a world-wide organization dedicated to providing its nine-hundred member companies research value-added marketing and distribution expertise. As Kerzner describes it over its ninety-year heritage LIMRA has become the repository for all of the life insurance industry’s knowledge and research. Kerzner offers us some valuable insights in this wide-ranging converse including comments on the insurance industry’s future role in Boomer retirement. Macchia – To begin. Bob and before we move into the LIMRA discussion. I think people would be interested in knowing about Bob Kerzner the executive. Would you be kind enough to communicate about how you came into the financial services industry how that began and the steps that led you to your current position as President and CEO of LIMRA? And yet an opportunity came my way that I absolutely found fascinating. It was in fact an opportunity to sell life insurance in a different way working through independent agents and working with their best wealthy clients. Once I got into it. I found out that I loved it—that it was an intense business and one that would accept me to be creative in helping people sight solutions to complex problems using a unique financial tool. I worked for one company for 30 years–working my way up from the lowest handle sales lay to field management and ultimately running the entire life insurance division with both top-line and bottom-line responsibility. I really had a wonderful go. Macchia- Your answer reminds me of something perhaps because it’s reflective of my own accent. But I’ve always believed that people who entered the business through the door of sales people who have had real experience at the sell level who understood the dynamics of prospecting and presenting to retail clients and all that that implies that such people obtain what amounts to a life-long advantage in terms of how they are able to apply their knowledge and skills of the business no be where their careers may take them. I wonder if you buy into that? Kerzner- Unequivocally. My experience in the field–having the experience of actually sitting across a table from a potential customer and trying to convince them that our product could solve a problem –gave me a unique perspective when I was running the division many years later. I don’t think that there’s any other way that you get that kind of perspective. And frankly one of the saddest things today is that very very few of the most senior people – the CEO roles in our industry – are coming from the handle. We’re certainly seeing less and less. And I do think that you get a very different point of view as you say that stays with you forever. Macchia- A relevant analogy can be open again in terms of my own undergo in which I describe my having had a leg in each of two displace and distinct ponds. Meaning the different experiences of the world of agents and distribution the flavor wet pond and another set of experiences having to do with he business challenges of product manufacturers- the fresh wet pond. I sight that it’s rare that these two ponds meet and the water becomes brackish. And because they do not meet well it’s seldom that there is genuine understanding of each other’s challenges and frustrations and it’s rare that meaningful communication exists between the two populations. Do you agree with how I see it? Kerzner- Well from my viewpoint I see it slightly different. We’re creating a product in our business that’s very technical. It must be passed through 50 different states often the SEC and the NASD which ordain care about how you sell it. During the development process it’s easy to get wrapped up in the complexities and lose sight of the consumer’s needs. First and foremost. LIMRA is about research. For ninety years we’ve been the repository for of all the industry’s knowledge and investigate. Generally speaking when somebody reads a inform about insurance or suggests that somebody’s number one in the industry they’re usually referring to LIMRA’s benchmarking of the industry. We also do a lot of the forward-thinking research about where the business is going. We’ve certainly been conducting more consumer research to try to understand how populate see our industry and think about our products; and what motivates people to buy or not to buy our products. We’ve expanded abroad. We’re now in 64 countries worldwide with more than 800 member companies. We’re now training in emerging markets in Eastern Europe as come up as throughout Asia on ways to modernize distribution and increase productivity to help companies be more successful. Kerzner- Yes. We are owned by our members. They finance all of the research but I should mention that we also undergo businesses that are not move of our 501 C(6). We have a wholly-owned subsidiary that provides an array of services to the industry. For example for 65 years we have done the testing for companies to cause who is most likely to become successful as a producer. Today we do similar testing for a be of fortune 100 companies including leading stock brokerage firms. We’ve become significant in the compliance business. We back up provide shared solutions to the industry designed to communicate real problems companies are facing. Beyond the research we care an array of other activities such as consulting with a strong practice in compensation planning. And. David. I evaluate I’d be remiss if I didn’t have in mind one more thing that is really at the core of LIMRA and that is networking. We run a broad spectrum of conferences and committee meetings throughout the year where populate who overlap the same roles and responsibilities can talk about and share beat practices share ideas and really get to know one another. That’s a really important aspect of LIMRA. It’s where the industry meets. Macchia- Let me ask you about another air which may become very important in LIMRA’s future and that is the idea of a merger between LIMRA and LOMA. I presume that the decision to combine LIMRA and LOMA comes out of an analysis that defines synergies and benefits arising out of such a combination. Will you talk a bit about LOMA’s bring home the bacon and then exposit the benefits you see resulting from such a merger? Kerzner- This is really an idea whose time has go. It’s been looked at in the past and for a variety of reasons the timing was not right. LOMA is clearly in the education business. While we undergo educated the field. LOMA has been the major educator of the domiciliate Office staff. Their FLMI designation within the back offices of companies is really the designation the gold standard. It is the training the broad knowledge that industry professionals be. Both because of the depth and breadth of that training and because it actually helps them do what they do better. LOMA runs conferences just as we do but often there’s more of a technology or efficiency cerebrate. So while we do many of the same things we do them in different parts of the organization. Coming together helps us take care of the totality of these education needs. A combination is also greatly complementary. They have built a great e-learning platform. We have not done that. Why should the industry pay for two e-learning systems? The benefits of merger are that the industry could have for the same capital outlay a much broader capability to answer the entire life insurance affiliate. So those are just a few of the highlights. Macchia- Bob. I’d like to alter to some challenges and opportunities facing life insurers. As you experience I am a creature of the insurance business having begun in 1977 as an agent at the lowest rung. I very much determine the 30 years I’ve been associated with this industry. I’ve had opportunities and financial rewards beyond anything I could have hoped for including an excellent education. So as someone who has gained a lot from the industry I’m an advise for its beat interests in the future especially in terms of the Boomer retirement opportunity. I often times think however that life insurers are not likely to arrive their fullest business potential unless and until some of the most intractable challenges and problems that hold back its growth are first identified and then dealt with and eliminated so that the industry can set itself up for robust growth. In my opening remarks. I ordain act a cut of a comment made last year by the president of a major mutual finance company who charged that the life insurance industry is going to breathe out the opportunity because they have not been very good at execution. Ironically that mutual fund company is owned by a life insurance company. So. I thought it was a particularly interesting statement. We took it seriously enough that we built this year’s program around the concept of execution. What does our industry have to do to capture their fair overlap of that opportunity that everybody knows is the biggest in history? A couple of the things that are important to look at: First many companies are too siloed to look at the total needs of the customer–we don’t spend enough time as some other parts of the financial services industry to really understand what the customer wants how they think. Although we certainly evaluate that LIMRA can play a role in that conjoin. Second there’s a lot of discussion about whether we take too much of a product cerebrate. The industry often takes a manufacturing view. Is that the beat come? Third is an air that LIMRA talks about—it’s move of who we are our fabric— and that’s distribution. The number of producers continues to decline in terms of career agents. The number of new agents continues to decline. So will there be enough distribution to meet these needs? And if not which we believe is a certainty what will the new avenues be to get our products in front of people more often? Macchia- What’s you’ve articulated here is in my day-to-day wheelhouse. Let me begin this by telling you that one of the reasons that this communicate was started was to try to galvanize the attention of industry leaders to some of the very challenges you’ve just mentioned. One of the issues that I’ve written about extensively is reflected in my own experience where 30 years ago I entered the business at the end of the rate schedule era and then saw that the introduction of the PC began to change things rather dramatically. It became easier for agents to evaluate the relative benefits of different companies’ products whereas previously they may have been focused exclusively on a single company’s products. And this led to a study shift in the way producers work which has led to today’s reality that most agents are independent agents. As this change took grow the insurance companies tended to change by reversal to a stance where the concentration was increasingly on manufacturing products rather than developing producers. The intensive training and education that was once routinely provided was in many cases eliminated and agents transitioned from career agents to what might be termed “free agents.” And I would lay out that this is one of the most significant reasons that the industry is plagued by a poor public image and poor sales practices. I wonder if you buy into that historical chain of events and its leading to some of today’s problems? Kerzner- Yeah… ah… unfortunately. I evaluate that there’s a missing conjoin in what you’ve suggested. We have created a model that actually talks about the natural events that occur as a market emerges. What I can tell you. David is that virtually all countries begin with a very strong career agent system and over time alternate distribution begins to register. Part of the issue is that somewhere along the lie products mouth to become much more sophisticated producers may come up not be trained adequately sales practices become aggressive and issues emerge around mis-selling. Now I should be clear that this change surface occurs in alternate distribution. So it’s not just agents. Those practices tend to invite tighter and tighter regulation. There tends to be a scandal resulting in poor public image and then ironically it tends to change state more difficult to register more people because now the job is harder. Anyone today who has to go through the myriad of 30-page proposals. 200-page prospectuses and all of the rest can certainly see what happens as products become more complex like they do in a develop market. But you can’t just lay that at the company doorstep. In fact unfortunately the actions of producers whether they are career agents or people working for financial institutions help to act this problem. Macchia- You know. I think that’s fair. But don’t you also evaluate there’s something more? As career agents have increasingly become independent they have also change state more increasingly underproductive than they were in the past. For instance when I was a young agent I was expected to achieve at least one sale of life insurance per week. And some of the veteran agents completed two or even three sales each week. This is phenomenally more productive than today’s agents bring home the bacon. As low productivity has taken root among the agent ranks there’s a natural tendency to desire out products which pay higher levels of commissions on each individual sale. And so you have the emergence of a viscous cycle where companies are more reliant on independent agents to a greater extent than ever before and they attempt to calm the agents’ wish for higher and higher compensation which leads to less and less consumer value in the products and to an ever-increasing negative public image. This creates a vicious make pass which is difficult to interrupt. Do you see that? Kerzner- Well yes but once again let me cite some LIMRA data. In fact over the past 30 years the number of policies per year sold–hence the number of families we touch–has consistently declined every year proving your point that agents have change state less productive. However producers at the same measure are selling a total amount of life insurance premium that continues to increase. So what I would suggest the data says that be one agents undergo gone upscale and have continuously moved more up-market selling fewer but larger face-amount policies. back up as you are come up aware agents are selling a much broader array of products than 30 years ago. They can sell annuities mutual funds- and life insurance. So some of that decrease in productivity has to do with the producers’ ability to get to their income objective by selling investment products which are easier. Certainly when I was President of the broker-dealer. I saw that when annuity sales skyrocketed life insurance sales often went the other way. So I evaluate. David that today producers can get to their desired income level in different ways. Macchia- Let me jump into another assertion I make which may be off-putting to some but it’s something I believe to be true after many years of personal observation. And that is that the life insurance industry- somehow- simultaneously develops both the world’s finest sales populate and the world’s worst marketers. And that the poor quality of marketing accounts to some extent- and maybe a large extent- for many of the industry’s contemporary challenges. Would you accept with this assertion? I actually am optimistic in that in the last 12 months I’ve seen a difference here. If you be at a be of companies and how they are positioning themselves in today’s environment you see improvement. I even played segments of a be of companies’ commercials at one of our conferences last year to show how I felt that they were doing a far exceed job of marketing on image on outcome and on getting people to think about the kind of retirement and lifestyle they want. I evaluate that they are doing a much better job than a couple of years ago. There’s even one company that’s doing an outstanding job of creating emotion around our products getting to the core triggers of why someone buys life insurance. So I think that the companies are getting better at marketing. Macchia-I’m glad to hear that because I believe that to a great extent the emotion component has been what’s missing from so much of the industry’s marketing initiatives. I’m happy that this is starting to happen now as the Boomer retirement opportunity begins to develop. And I’d like to move our conversation in that direction if I could. I say ill-conceived marketing and positioning because over recent years the VA product was showcased as an alternative to other investments such as mutual funds. This invited criticisms over comparative cost structures not to mention unfavorable income tax comparisons. Now with the recent focus on guaranteed withdrawal riders it seems the variable annuity product can be re-characterized repositioned as what it really is- an insurance vehicle capable of delivering a set of benefits that can be extremely beneficial to people needing a guaranteed baseline retirement income. I wonder if you see the air this way. Bob in terms of my belief that there’s been an historical mistake made over the product’s positioning and that now there’s an excellent opportunity to re-focus the insured aspects of the VA contract? And that these insured benefits have costs which are justifiable? I guess what I’m saying is do you see this as a timely opportunity to change by reversal past mistakes and set the stage for growth in the VA line? Kerzner- I think that there are a lot of complexities in that proposition. Let me go at it this way. I was in the handle. I used to talk with a client about the two lives of an annuity- the pay-in period and the pay-out period. I tried to make absolutely certain that clients understood that one of the significant advantages was the tax preference during the build-up years and that they really understood why that was a benefit. And in the early years that certainly was a key component of what got us the attention–the fact that you could get those gains in the market you could supplement your retirement savings … and it was a good forced savings vehicle. We spent hardly any time regrettably—and this is where I evaluate we made the identify— in talking about what annuities do best in terms of the pay-out phase. When we hit the downturn in the merchandise many were concerned that variable annuities would experience a precipitous drop in sales. And here’s where I would take a slightly different perspective and say that I think the industry did a great job of determining what it is that the consumer really wants. LIMRA data suggested that more absolute certainty is what the consumer wanted. What people love most about our industry is our guarantees. But also during that period. I believe companies—because of the downturn—did a much better job of making populate understand that the death benefit really was extremely valuable. I’d accept however that there was a period of measure that we didn’t sell that benefit well and didn’t alter people understand its adjust value. Let me conclude with this. The industry has enjoyed seven consecutive quarters of record-breaking sales of variable annuities. That’s in large measure due to the creativity to the improvement in positioning and the creation of these riders which gave American consumers more of what they said they wanted. Macchia- Well I accept with much of what you say. And you should know that I’m a strong advise of the variable annuity. I accept it’s underutilized. But I would… not challenge… but remind you of the fact that while sales growth has been obvious there are still inherent weaknesses in those results in the comprehend that approximately two-thirds of those sales conclude from 1025(a) (1035?) exchanges and we still have a situation where four fifths of advisors shun the variability annuity assure. And to me this goes back to historical ineffectiveness on properly positioning the product. This is the challenge going forward in my judgment. We’re talking about a unique type of product with a solid and valuable acquire structure but minds have to be changed. And often the insurance business doesn’t get the acquire of the doubt… Kerzner- And I think. David we absolutely agree and I’m not suggesting we can’t do much better—that there isn’t tremendous upside opportunity and that there doesn’t need to be some different alternatives made available—to get those other advisors in the game. We also undergo to do a better job of using the product with younger clients in their forties as a systematic tool for savings. Kerzner- And that actually gets to the next topic of Boomer retirement where the ultimate war will be won or lost by each divide of the industry. It is about retaining the asset. That is the next battleground and frankly the one for the next 20 or 30 years that really matters a lot. Clearly annuities’ furnish the potential to provide periodic payouts like no other financial vehicle can. And therein lies one of the great opportunities and still unresolved challenges for our industry: can we be the one to really get the income phase alter? To take advantage of the unique structural financial leveragable opportunities- and all that we do best- to really capture our share of the assets in the payout arrange? Macchia- That’s the key question. I think you’re exactly right. There are many elements to answering that question. Communications is a big part of it technology is a move of it competition is a part of it. Let me cerebrate on competition. In the current air of National Underwriter there’s an article written by Norse Blazzard and Judith Hasenhauer which talks about copycats eying the development of variable annuity type features. Here’s a ingeminate: Most likely every major investment firm is busily working on providing a GMWB to customers by mutual funds managed separate accounts and change surface hedge funds all without requiring the clients to become involved with a VA.” I also recently noted an bind which addresses the growth of structured products. And I’ve written myself about structured products and the fact that large asset management firms which undergo traditionally aimed structured products at the institutional markets are now aiming them increasingly at the high net worth market and potentially the mass merchandise with intention of replicating some of the core benefits found in traditional annuity contracts. In a recent interview at this Blog I asked Professor Moshe Milevsky about this very issue. Moshe predicated that within two years we may see a dozen study new players- in terms of study asset management firms- coming to merchandise with structured products for consumers that target what is inherently and traditionally the insurers’ playing handle. I query if this is something that you and LIMRA think about and what the impact of new competition may pose in the way of challenges for life insurers? Kerzner- Yeah it’s a great question and it’s something that we think about a lot. We have begun working on what we call arrange Five which predicts the future of the industry. And in fact what we say that it is highly likely that there ordain be other new players—different forms of competition—than exist today. We also did another study with a assort called DSI which is linked to Wharton and we looked at four possible future scenarios of what the life insurance industry could look like in 2016. The two study axes that we thought would alter most the future of the industry were first. “will there or will there not be high bespeak?” And second. “what ordain the environmental climate for competition be?” In the last five years we’ve begun to use dynamic hedging. We’ve used financial tools from other large financial institutions that undergo made many of these guarantees that we’ve associated with our products possible and have made their success. Others who accumulate assets are envious of our success and will look to emulate what we’ve done successfully to broaden their offerings. Americans undergo demonstrated that they are willing to pay an extra charge for that guarantee. So I do evaluate that you are going to see new forms of competition from non-traditional sources. And as I say this is one of the things that we are talking about and predicting. It’s highly likely. I believe quite strongly- and have stated publicly- that the high stakes business opportunity wrapped around Boomer retirement ordain prove to reveal winners… and losers. And to an extent-not exclusively certainly- but to arguably a significant extent- the winners will not be those with the so-called “best product” but rather will be those which excel at compliantly communicating their determine to a large and fluid marketplace. I wonder if you agree with this assertion? Kerzner- I’m not at all suggesting that’s not important but I evaluate there are a couple of other issues. be one. I believe that innovation is important. If you look at the leaders you’ll note that they are often very early to merchandise with major innovations and are constantly innovating. The bigger companies that are well positioned and are innovative ordain be the most successful. That’s one of the things that will remain important. I still accept that distribution is critical. The companies that undergo the best distribution will have one of the important keys to success. And finally this air we talked about earlier- execution- is important. Who ordain be able to put all the pieces together and deliver across a platform? I’m not suggesting that communications isn’t crucial because as you pointed out more of the producers are independent. You’re going to undergo to communicate why you’re better how you’re bringing more value. Not just to consumers but also to other distribution channels—and in a way that’s superior to competitors. Macchia- I think that’s very fair. I want to ask you about a quote that I saw recently from attach Timergien of Moss Adams who made some comments indicating that there’s going to be far too many consumers for the be of available advisors. He also stated that 70% of the industry is made up of solo practitioners who don’t be to change. I query what changes you envision that may undergo to emerge for companies to get to the effective distribution that you just described as being so important? Kerzner- In fact we just completed and released fit work with attach and Moss- Adams on this very subject last week. We believe distribution ordain undergo to be substantially different in the future. That doesn’t convey that existing distribution goes away—but I will talk at length at our annual meeting about why we accept that technology is a game-changer. We expect technology will have a material change on how distribution could look in 5 to 10 years. Just desire we couldn’t have envisioned the impact that the iPod would have on the music industry. I evaluate we could see distinctly new forms of distribution because of technology. Technology that makes the ability to acquire our products easier as well as technology that allows us to get our message to consumers in new and different ways.

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Bob Kerzner is a passionate advise for the life insurance industry. Since 2004 he has been the President & CEO of a world-wide organization dedicated to providing its nine-hundred member companies research value-added marketing and distribution expertise. As Kerzner describes it over its ninety-year heritage LIMRA has change state the repository for all of the life insurance industry’s knowledge and research. Kerzner offers us some valuable insights in this wide-ranging converse including comments on the insurance industry’s future role in Boomer retirement. Macchia – To begin. Bob and before we jump into the LIMRA discussion. I think people would be interested in knowing about Bob Kerzner the executive. Would you be kind enough to talk about how you came into the financial services industry how that began and the steps that led you to your current position as President and CEO of LIMRA? And yet an opportunity came my way that I absolutely found fascinating. It was in fact an opportunity to sell life insurance in a different way working through independent agents and working with their best wealthy clients. Once I got into it. I found out that I loved it—that it was an intense business and one that would accept me to be creative in helping populate find solutions to complex problems using a unique financial drive. I worked for one company for 30 years–working my way up from the lowest handle sales position to field management and ultimately running the entire life insurance division with both top-line and bottom-line responsibility. I really had a wonderful career. Macchia- Your answer reminds me of something perhaps because it’s reflective of my own accent. But I’ve always believed that people who entered the business through the door of sales people who have had real undergo at the retail aim who understood the dynamics of prospecting and presenting to retail clients and all that that implies that such populate acquire what amounts to a life-long advantage in terms of how they are able to apply their knowledge and skills of the business no matter where their careers may take them. I wonder if you buy into that? Kerzner- Unequivocally. My experience in the field–having the undergo of actually sitting across a delay from a potential customer and trying to persuade them that our product could solve a problem –gave me a unique perspective when I was running the division many years later. I don’t evaluate that there’s any other way that you get that kind of perspective. And frankly one of the saddest things today is that very very few of the most senior people – the CEO roles in our industry – are coming from the field. We’re certainly seeing less and less. And I do evaluate that you get a very different point of believe as you say that stays with you forever. Macchia- A relevant analogy can be found again in terms of my own experience in which I describe my having had a leg in each of two separate and distinct ponds. Meaning the different experiences of the world of agents and distribution the salt water pond and another set of experiences having to do with he business challenges of product manufacturers- the fresh water pond. I observe that it’s rare that these two ponds meet and the water becomes brackish. And because they do not meet come up it’s seldom that there is genuine understanding of each other’s challenges and frustrations and it’s rare that meaningful communication exists between the two populations. Do you accept with how I see it? Kerzner- come up from my viewpoint I see it slightly different. We’re creating a product in our business that’s very technical. It must be passed through 50 different states often the SEC and the NASD which will compassionate about how you change it. During the development affect it’s easy to get wrapped up in the complexities and suffer sight of the consumer’s needs. First and foremost. LIMRA is about research. For ninety years we’ve been the repository for of all the industry’s knowledge and research. Generally speaking when somebody reads a inform about insurance or suggests that somebody’s number one in the industry they’re usually referring to LIMRA’s benchmarking of the industry. We also do a lot of the forward-thinking research about where the business is going. We’ve certainly been conducting more consumer investigate to try to understand how people see our industry and think about our products; and what motivates people to buy or not to buy our products. We’ve expanded abroad. We’re now in 64 countries worldwide with more than 800 member companies. We’re now training in emerging markets in Eastern Europe as well as throughout Asia on ways to modernize distribution and change magnitude productivity to back up companies be more successful. Kerzner- Yes. We are owned by our members. They fund all of the research but I should have in mind that we also have businesses that are not part of our 501 C(6). We undergo a wholly-owned subsidiary that provides an array of services to the industry. For example for 65 years we have done the testing for companies to determine who is most likely to become successful as a producer. Today we do similar testing for a number of fortune 100 companies including leading stock brokerage firms. We’ve become significant in the compliance business. We help provide shared solutions to the industry designed to address real problems companies are facing. Beyond the research we conduct an array of other activities such as consulting with a strong practice in compensation planning. And. David. I think I’d be remiss if I didn’t mention one more thing that is really at the core of LIMRA and that is networking. We run a broad spectrum of conferences and committee meetings throughout the year where people who share the same roles and responsibilities can talk about and share beat practices share ideas and really get to experience one another. That’s a really important aspect of LIMRA. It’s where the industry meets. Macchia- Let me ask you about another issue which may change state very important in LIMRA’s future and that is the idea of a merger between LIMRA and LOMA. I presume that the decision to combine LIMRA and LOMA comes out of an analysis that defines synergies and benefits arising out of such a combination. Will you talk a bit about LOMA’s bring home the bacon and then describe the benefits you see resulting from such a merger? Kerzner- This is really an idea whose time has come. It’s been looked at in the past and for a variety of reasons the timing was not right. LOMA is clearly in the education business. While we have educated the field. LOMA has been the major educator of the Home Office staff. Their FLMI designation within the approve offices of companies is really the designation the gold standard. It is the training the broad knowledge that industry professionals want. Both because of the depth and breadth of that training and because it actually helps them do what they do better. LOMA runs conferences just as we do but often there’s more of a technology or efficiency focus. So while we do many of the same things we do them in different parts of the organization. Coming together helps us take care of the totality of these education needs. A combination is also greatly complementary. They have built a great e-learning platform. We undergo not done that. Why should the industry pay for two e-learning systems? The benefits of merger are that the industry could have for the same capital outlay a much broader capability to serve the entire life insurance company. So those are just a few of the highlights. Macchia- Bob. I’d like to shift to some challenges and opportunities facing life insurers. As you know I am a creature of the insurance business having begun in 1977 as an agent at the lowest rung. I very much value the 30 years I’ve been associated with this industry. I’ve had opportunities and financial rewards beyond anything I could have hoped for including an excellent education. So as someone who has gained a lot from the industry I’m an advocate for its best interests in the future especially in terms of the Boomer retirement opportunity. I often times evaluate however that life insurers are not likely to reach their fullest business potential unless and until some of the most intractable challenges and problems that direct back its growth are first identified and then dealt with and eliminated so that the industry can set itself up for robust growth. In my opening remarks. I will take a clip of a comment made last year by the president of a major mutual fund company who charged that the life insurance industry is going to breathe out the opportunity because they undergo not been very good at execution. Ironically that mutual fund affiliate is owned by a life insurance affiliate. So. I thought it was a particularly interesting statement. We took it seriously enough that we built this year’s program around the concept of execution. What does our industry have to do to capture their fair overlap of that opportunity that everybody knows is the biggest in history? A couple of the things that are important to look at: First many companies are too siloed to be at the total needs of the customer–we don’t spend enough time as some other parts of the financial services industry to really understand what the customer wants how they think. Although we certainly think that LIMRA can play a role in that piece. Second there’s a lot of discussion about whether we act too much of a product focus. The industry often takes a manufacturing view. Is that the best approach? Third is an air that LIMRA talks about—it’s part of who we are our fabric— and that’s distribution. The number of producers continues to change state in terms of career agents. The be of new agents continues to decline. So ordain there be enough distribution to cater these needs? And if not which we believe is a certainty what will the new avenues be to get our products in front of people more often? Macchia- What’s you’ve articulated here is in my day-to-day wheelhouse. Let me begin this by telling you that one of the reasons that this blog was started was to try to galvanize the attention of industry leaders to some of the very challenges you’ve just mentioned. One of the issues that I’ve written about extensively is reflected in my own experience where 30 years ago I entered the business at the end of the evaluate book era and then saw that the introduction of the PC began to change things rather dramatically. It became easier for agents to assess the relative benefits of different companies’ products whereas previously they may have been focused exclusively on a single affiliate’s products. And this led to a major alter in the way producers work which has led to today’s reality that most agents are independent agents. As this change took root the insurance companies tended to revert to a stance where the concentration was increasingly on manufacturing products rather than developing producers. The intensive training and education that was once routinely provided was in many cases eliminated and agents transitioned from career agents to what might be termed “free agents.” And I would argue that this is one of the most significant reasons that the industry is plagued by a poor public image and poor sales practices. I wonder if you buy into that historical chain of events and its leading to some of today’s problems? Kerzner- Yeah… ah… unfortunately. I think that there’s a missing piece in what you’ve suggested. We have created a copy that actually talks about the natural events that become as a market emerges. What I can tell you. David is that virtually all countries begin with a very strong career agent system and over measure alternate distribution begins to enter. move of the issue is that somewhere along the line products begin to become much more sophisticated producers may well not be trained adequately sales practices become aggressive and issues emerge around mis-selling. Now I should be alter that this change surface occurs in alternate distribution. So it’s not just agents. Those practices tend to invite tighter and tighter regulation. There tends to be a scandal resulting in poor public visualise and then ironically it tends to become more difficult to register more people because now the job is harder. Anyone today who has to go through the myriad of 30-page proposals. 200-page prospectuses and all of the rest can certainly see what happens as products change state more complex like they do in a mature market. But you can’t just lay that at the company doorstep. In fact unfortunately the actions of producers whether they are go agents or people working for financial institutions back up to act this problem. Macchia- You experience. I think that’s fair. But don’t you also think there’s something more? As career agents have increasingly change state independent they have also become more increasingly underproductive than they were in the past. For dilate when I was a young agent I was expected to achieve at least one sale of life insurance per week. And some of the veteran agents completed two or even three sales each week. This is phenomenally more productive than today’s agents achieve. As low productivity has taken root among the agent ranks there’s a natural tendency to seek out products which pay higher levels of commissions on each individual sale. And so you undergo the emergence of a viscous make pass where companies are more reliant on independent agents to a greater extent than ever before and they attempt to placate the agents’ desire for higher and higher compensation which leads to less and less consumer value in the products and to an ever-increasing contradict public image. This creates a vicious cycle which is difficult to interrupt. Do you see that? Kerzner- Well yes but once again let me cite some LIMRA data. In fact over the past 30 years the number of policies per year sold–hence the be of families we touch–has consistently declined every year proving your inform that agents have change state less productive. However producers at the same time are selling a total amount of life insurance premium that continues to escalate. So what I would suggest the data says that number one agents undergo gone upscale and have continuously moved more up-market selling fewer but larger face-amount policies. Second as you are come up aware agents are selling a much broader array of products than 30 years ago. They can sell annuities mutual funds- and life insurance. So some of that decrease in productivity has to do with the producers’ ability to get to their income objective by selling investment products which are easier. Certainly when I was President of the broker-dealer. I saw that when annuity sales skyrocketed life insurance sales often went the other way. So I think. David that today producers can get to their desired income aim in different ways. Macchia- Let me jump into another assertion I make which may be off-putting to some but it’s something I believe to be adjust after many years of personal observation. And that is that the life insurance industry- somehow- simultaneously develops both the world’s finest sales populate and the world’s beat marketers. And that the poor quality of marketing accounts to some extent- and maybe a large extent- for many of the industry’s contemporary challenges. Would you accept with this assertion? I actually am optimistic in that in the measure 12 months I’ve seen a difference here. If you look at a number of companies and how they are positioning themselves in today’s environment you see improvement. I even played segments of a number of companies’ commercials at one of our conferences last year to show how I felt that they were doing a far better job of marketing on image on outcome and on getting populate to think about the kind of retirement and lifestyle they want. I evaluate that they are doing a much exceed job than a couple of years ago. There’s change surface one company that’s doing an outstanding job of creating emotion around our products getting to the core out triggers of why someone buys life insurance. So I think that the companies are getting exceed at marketing. Macchia-I’m glad to hear that because I accept that to a great extent the emotion component has been what’s missing from so much of the industry’s marketing initiatives. I’m happy that this is starting to happen now as the Boomer retirement opportunity begins to develop. And I’d desire to move our conversation in that direction if I could. I say ill-conceived marketing and positioning because over recent years the VA product was showcased as an alternative to other investments such as mutual funds. This invited criticisms over comparative cost structures not to have in mind unfavorable income tax comparisons. Now with the recent refocus on guaranteed withdrawal riders it seems the variable annuity product can be re-characterized repositioned as what it really is- an insurance vehicle capable of delivering a set of benefits that can be extremely beneficial to people needing a guaranteed baseline retirement income. I query if you see the issue this way. Bob in terms of my belief that there’s been an historical mistake made over the product’s positioning and that now there’s an excellent opportunity to re-focus the insured aspects of the VA contract? And that these insured benefits have costs which are justifiable? I guess what I’m saying is do you see this as a timely opportunity to correct past mistakes and set the re-create for growth in the VA line? Kerzner- I think that there are a lot of complexities in that advise. Let me go at it this way. I was in the handle. I used to communicate with a client about the two lives of an annuity- the pay-in period and the pay-out period. I tried to alter absolutely certain that clients understood that one of the significant advantages was the tax preference during the build-up years and that they really understood why that was a benefit. And in the early years that certainly was a key component of what got us the attention–the fact that you could get those gains in the market you could supplement your retirement savings … and it was a good forced savings vehicle. We spent hardly any measure regrettably—and this is where I think we made the mistake— in talking about what annuities do best in terms of the pay-out phase. When we hit the downturn in the market many were concerned that variable annuities would experience a precipitous drop in sales. And here’s where I would take a slightly different perspective and say that I think the industry did a great job of determining what it is that the consumer really wants. LIMRA data suggested that more absolute certainty is what the consumer wanted. What people love most about our industry is our guarantees. But also during that period. I believe companies—because of the downturn—did a much better job of making people understand that the death acquire really was extremely valuable. I’d accept however that there was a period of measure that we didn’t sell that benefit well and didn’t make people understand its adjust value. Let me cerebrate with this. The industry has enjoyed seven consecutive quarters of record-breaking sales of variable annuities. That’s in large decide due to the creativity to the improvement in positioning and the creation of these riders which gave American consumers more of what they said they wanted. Macchia- come up I agree with much of what you say. And you should know that I’m a strong advise of the variable annuity. I accept it’s underutilized. But I would… not challenge… but inform you of the fact that while sales growth has been obvious there are comfort inherent weaknesses in those results in the sense that approximately two-thirds of those sales derive from 1025(a) (1035?) exchanges and we still have a situation where four fifths of advisors shun the variability annuity assure. And to me this goes back to historical ineffectiveness on properly positioning the product. This is the contend going send in my judgment. We’re talking about a unique type of product with a solid and valuable benefit coordinate but minds have to be changed. And often the insurance business doesn’t get the acquire of the doubt… Kerzner- And I evaluate. David we absolutely agree and I’m not suggesting we can’t do much better—that there isn’t tremendous upside opportunity and that there doesn’t need to be some different alternatives made available—to get those other advisors in the game. We also have to do a exceed job of using the product with younger clients in their forties as a systematic tool for savings. Kerzner- And that actually gets to the next topic of Boomer retirement where the ultimate war will be won or lost by each segment of the industry. It is about retaining the asset. That is the next battleground and frankly the one for the next 20 or 30 years that really matters a lot. Clearly annuities’ offer the potential to provide periodic payouts desire no other financial vehicle can. And therein lies one of the great opportunities and still unresolved challenges for our industry: can we be the one to really get the income arrange right? To take advantage of the unique structural financial leveragable opportunities- and all that we do best- to really interpret our share of the assets in the payout phase? Macchia- That’s the key question. I evaluate you’re exactly right. There are many elements to answering that question. Communications is a big part of it technology is a part of it competition is a move of it. Let me focus on competition. In the current issue of National Underwriter there’s an bind written by Norse Blazzard and Judith Hasenhauer which talks about copycats eying the development of variable annuity type features. Here’s a quote: Most likely every major investment firm is busily working on providing a GMWB to customers by mutual funds managed separate accounts and even hedge funds all without requiring the clients to change state involved with a VA.” I also recently noted an article which addresses the growth of structured products. And I’ve written myself about structured products and the fact that large asset management firms which have traditionally aimed structured products at the institutional markets are now aiming them increasingly at the high net worth market and potentially the mass market with intention of replicating some of the core benefits found in traditional annuity contracts. In a recent converse at this Blog I asked Professor Moshe Milevsky about this very issue. Moshe predicated that within two years we may see a dozen study new players- in terms of major asset management firms- coming to market with structured products for consumers that aim what is inherently and traditionally the insurers’ playing field. I wonder if this is something that you and LIMRA think about and what the force of new competition may pose in the way of challenges for life insurers? Kerzner- Yeah it’s a great question and it’s something that we think about a lot. We have begun working on what we call Phase Five which predicts the future of the industry. And in fact what we say that it is highly likely that there will be other new players—different forms of competition—than exist today. We also did another study with a group called DSI which is linked to Wharton and we looked at four possible future scenarios of what the life insurance industry could look desire in 2016. The two major axes that we thought would alter most the future of the industry were first. “will there or ordain there not be high bespeak?” And second. “what ordain the environmental climate for competition be?” In the measure five years we’ve begun to use dynamic hedging. We’ve used financial tools from other large financial institutions that have made many of these guarantees that we’ve associated with our products possible and have made their success. Others who accumulate assets are envious of our success and will look to emulate what we’ve done successfully to broaden their offerings. Americans undergo demonstrated that they are willing to pay an extra charge for that guarantee. So I do think that you are going to see new forms of competition from non-traditional sources. And as I say this is one of the things that we are talking about and predicting. It’s highly likely. I accept quite strongly- and have stated publicly- that the high stakes business opportunity wrapped around Boomer retirement will be to show winners… and losers. And to an extent-not exclusively certainly- but to arguably a significant extent- the winners ordain not be those with the so-called “best product” but rather ordain be those which excel at compliantly communicating their value to a large and fluid marketplace. I query if you agree with this assertion? Kerzner- I’m not at all suggesting that’s not important but I think there are a couple of other issues. Number one. I believe that innovation is important. If you look at the leaders you’ll note that they are often very early to market with major innovations and are constantly innovating. The bigger companies that are well positioned and are innovative ordain be the most successful. That’s one of the things that ordain be important. I comfort believe that distribution is critical. The companies that have the best distribution ordain have one of the important keys to success. And finally this issue we talked about earlier- execution- is important. Who will be able to put all the pieces together and deliver across a platform? I’m not suggesting that communications isn’t crucial because as you pointed out more of the producers are independent. You’re going to undergo to communicate why you’re better how you’re bringing more value. Not just to consumers but also to other distribution channels—and in a way that’s superior to competitors. Macchia- I think that’s very bring together. I want to ask you about a quote that I saw recently from attach Timergien of Moss Adams who made some comments indicating that there’s going to be far too many consumers for the be of available advisors. He also stated that 70% of the industry is made up of solo practitioners who don’t be to change. I wonder what changes you envision that may have to appear for companies to get to the effective distribution that you just described as being so important? Kerzner- In fact we just completed and released joint bring home the bacon with Mark and Moss- Adams on this very subject measure week. We accept distribution will undergo to be substantially different in the future. That doesn’t mean that existing distribution goes away—but I ordain talk at length at our annual meeting about why we believe that technology is a game-changer. We expect technology will undergo a material dress on how distribution could look in 5 to 10 years. Just like we couldn’t undergo envisioned the impact that the iPod would have on the music industry. I evaluate we could see distinctly new forms of distribution because of technology. Technology that makes the ability to purchase our products easier as well as technology that allows us to get our message to consumers in new and different ways.

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We've Moved! Our blog place is now on Blogger. Here are the archives from the old site:We would like to accept a new addition to the consulting team. Mr. Ho is currently a full scholarship recipient majoring in Business Administration at the University of Southern California (USC). He serves as a member of the come in of directors of the a $300 million financial institution. His key responsibility at Glatt Consulting. LLC will be to assist ascribe unions in developing "next generation" membership outreach and growth strategy."ascribe Unions have been told time and time again to go out and get younger members," says Glatt Consulting. LLC Executive Consultant and owner Tom Glatt. Jr. "The problem they approach in reaching that group is that the products services and outreach strategies perfected over measure for the baby boomer market really do not bring home the bacon as well for the next generation. By bringing Justin's perspective and expertise to the aggroup we are positioned to furnish an authentic next generation resource to help ascribe unions draft new strategies for a merchandise many have a hard time understanding and reaching."According to Mr. Ho. "There is no question that the ascribe union movement is in real danger as banks gain the upper transfer in just about every service a financial institution can offer to a member of Gen-Y. The competitive advantages that ascribe unions had in the past are no longer perceived as prominently as before. The foundation of this problem lies in the fact that few people of Gen-Y change surface understand the underlying differences between credit unions and banks. The add up of a ascribe union member is 47 - capturing members outside of this demographic remains a daunting yet necessary task."Mr. Ho has already used his entrepreneurial and marketing experience to help create programs that accept the USC Credit Union to compete with other financial institutions for members of this demographic through means such as recognise programs and web channels. "I heard Justin speak on this very topic at the Director's Conference this past August. Within minutes of the end of his session we began hashing out the consulting relationship. The successful programs on which he has worked at USC ascribe Union and the believe the credit union has placed in him as a full member of the board made the decision to cerebrate him to the broader credit union market very easy," says Glatt. "He is a great addition to our team and will certainly be to be an extremely valuable consulting resource for our credit union clients."The Glatt Consulting. LLC schedule spearheaded by Justin starts with the “Gen-Y Strategy Report separate,” a rating calculated following an in-depth review of a client ascribe union's current Gen-Y outreach efforts and product and service parameters. The results and key findings of the initial analyse are the utilized to help the ascribe union exceed understand the current extent of their Gen-Y membership locate to understand if the ascribe union's services are create from raw material to give Gen-Y needs and to build the credit union's foundation for developing strategies and launching products that ordain help the credit union capture this pool. "Because the program is intensive we intend on initially serving a decide number of ascribe unions before expanding to a broader client locate," says Glatt. "The next generation of credit union members is very important to industry survival. Each client going through this process deserves dedicated attention; the kind of attention that ordain prove in the most rewarding next-generation strategies. By limiting our rollout we ordain be better positioned to excel our client's expectations."The consulting schedule will be restricted to between five and seven credit unions during the fourth quarter. Credit unions interested in discussing the schedule in depth are invited to contact Mr. Ho directly via telecommunicate at or via telephone at (888) 217-5988 extension 803."Whatever you label them be it gen-y millenials or next-gen the fact is this group represents a substantial but untapped potential for growth," says Mr. Ho. "I am excited to help our clients distinguish themselves from other financial institutions through creative strategy so that they are exceed positioned to tap this once-in-a-generation opportunity."9:03 AMSeptember 12To ingeminate a New York city expel moonlighting as a go driver in Hawaii. "credit union's are a dormant industry." After a couple of weeks spent thinking about this man's perspective there may be some truth to his observation. He contends that ascribe unions undergo this great opportunity to reach out to a variety of people in the context of shared interests because of credit union common bonds but that the industry does not act advantage of its unique structure. There are very few go drivers who undergo an understanding of credit unions fewer comfort who can analyse an industry's challenge. Perhaps credit unions are dormant. Sure there are a few ascribe unions growing leaps and bounds attracting new members (not just churning members from other CUs) but it seems more and more that these are the exceptions rather than the rule. We can certainly see how those on the outside might see credit unions as a bit sleepy and even out-of-touch. One statement this driver made that we open particularly interesting is that "credit unions undergo no national mouthpiece." Where the investment displace has Warren strike and technology has Bill Gates and Steve Jobs credit unions have nothing. Even milk at a mere $2 per gallon has a national publicity campaign. Sure there is the America's ascribe Unions logo but where do you see it? On credit union websites? How effective can that possibly be?We're not sure where to act this man's overall comments but we do know one thing: other's likely share his opinion and industry numbers give his assertions. Non-existent membership growth an ever-increasing add up age for members and limited youth representation on Boards. Sure sounds like dormancy to us. At a planning session just measure weekend a wise Board member said that in request to succeed the ascribe union would have to "keep its fire." The decision for many is not to maintain but to start a blast. In order to truly arise out of dormancy and into national relevance we be to sight a way to cerebrate with those we answer. We be passion and excitement and a true belief in our alter to rest shoulder-to-shoulder with every other financial services charter type. We need outreach broad membership representation on our boards and a desire to succeed. That is of course if we truly see perceived dormancy as a problem. 10:38 AMAugust 26I am on my way back from overturn Bay in Hawaii afer speaking for the Hawaii ascribe Union League. I had the most interesting conversation about credit unions with the shuttle driver who took me to the airport. After I get back to the office I will write it up. His perspective? ascribe unions represent a dormant industry. Tom5:08 PMAugust 13In between exhibit hall commitments and meetings with clients we managed to act in a few of the educational sessions provided during the conference. Here are a few of our thoughts and takeaways from the sessions attended. NCUA come in Member Gigi HylandWe enjoyed Gigi's remarks. Her statement to attendees that "it's about the members" resonated with us. The thought that popped up when she made the statement however was what happens when member needs run afoul of the wishes of examiners? It seems that for many ascribe unions the hard choices they make to grow services to cater the demands of members are often met with pushback from examiners. Any ascribe union whose strategic plan calls for temporary negative earnings and certainly those credit unions in the midst of the realities of such strategies have certainly had heart-to-hearts with their favorite government employees. To Gigi's credit she addressed this issue by saying that the agency is pushing to get examiners up-to-sped in understanding credit union strategic plans. She also told the 1,700 populate in the dwell that ascribe unions undergo the right to challenge their examiners taking their appeals to examiners findings through an analysis channel. In this commentary she encouraged dialogue vs combat when it comes to examiner/ascribe union relations. Hopefully the examiners themselves undergo head the same speech. In conversations related to Gigi's speech many attendees we talked to were unanimous that the Board is saying some very good things - but that it is truly measure for challenge. There is a widely-held belief in the industry (one that should not come as a surprise to the agency) that the staff is running the agency and that the come in has lost quite a bit of its control. adjust or not perception is reality. The Board needs some public wins that back up alter "lost confidence" in the regulator. Here is a case in point. A few weeks ago we heard Gigi's fellow board member Rodney cover's speech at at ALM First's conference in Colorado. A concern raised at the meeting was with the bid affect used by the agency when a troubled ascribe union is put 'on the block' so to communicate. At the meeting there seemed to be a unanimous belief that cronyism exists in that process and a few recent examples were provided to Rodney in his Q&A session. Rodney suggested he had heard similar concerns voiced at other venues and that he intended to look into the issue. It is precisely this kind of challenge that if resolved publicly and to the betterment of the agency could improve agency standing in the minds of the nations federally insured ascribe unions. Generation YThere were two sessions designed to help attendees understand the Gen Y/youth market. One was a adorn moderated by the ever-funny Patrick Adams. Pat posed a variety of questions to four 20-something's on the adorn. It was an interesting session and perhaps the most interesting were the responses to Pat's question about the difference between ascribe union's and banks. Not one of the four panelists (two of which were apparently credit union members) truly articulated the difference. One panelist suggested that ascribe unions were more obtain than banks because they were "federal" while another suggested that banks charge fees credit unions do not. Our takeaway from he session was that this demographic doesn't get ascribe unions and that even if they did they probably would not compassionate about the adjust differences between banks and credit unions. While this session was more or less billed as an informational exchange and as such was not designed to furnish solutions the second Gen Y program featuring Brass's Brian Simms was. We can't say that the product matched the advertising. The session itself was very come up designed with lots of multi-media clips and featurettes but at the end of the session many of the attendees we talked to sitting nearby were unsure what they learned about Geny Y. It seemed to many that the whole endeavor was a big Brass commercial. Not to act anything away from Brian and Brass but the takeaway lacked depth. While not billed as a Gen Y session those who attended the presentation by USC ascribe Union CEO Gary Perez were treated to an in-depth how-to when it comes to Gen Y outreach. Gary brought one of his Board members along with him as co-presenter. We experience the visual visualise you may have now but this Board member is a twenty year-old engineering student at the University. The presentation dealt with student lending (which Gary presented) as come up as with how to communicate to the Next Gen market. Justin Ho the board member really took attendees to task for current ascribe union youth outreach. We believe attendees would have been better served to have heard Justin and Gary on the main stage. The Great DebateThe panel session on hostile mergers featuring Continental CEO Tom Glatt Sr.. Filene's Bob Hoel and an attorney named Peter Duffy was fun to watch - particularly the exchanges between Tom Sr and Bob. The funny thing is that Tom Sr and Bob believe the same thing even though they were representing opposite perspectives on the Wings/Continental move. The common theme? Credit unions be to be doing all they can to answer members. A capital ratio soaring into double-digit range per the debaters does not indicate an institution dedicated to delivering value to the membership. Bob did make this interesting mention. He said that the Continental Board "did not be to allow members to choose on the merger proposal." apparently indicating a belief that members should do just that. We don't believe they should. If you take that line of thinking to its logical conclusion then members should be making policy decisions and setting interest rates. create by mental act the chaos! The real challenge is how do ascribe unions exceed engage members so that they change state active in the credit union governance affect? If members were more aware of their ownership status perhaps ascribe unions would be working harder to deliver a more consistent determine. If that were the case at continental for example members desire ago would undergo demanded exceed service and could undergo forced management corrections. Another way of looking at this and a way more relevant to the audience at the conference is to address whether credit union Boards nationwide are truly representing their respective memberships. As elected member advocates shouldn't Boards be more demanding of management taking them to task when real value isn't returned to members? Now that would be an interesting consider. One final thought on this session. Peter remarked during his administer of the session that banks may be doing a better job delivering convenience because they are adding branches at a far faster cut than ascribe unions. The comparison was a 7 to 3 tip favor. He seemed to suggest that as a prove of their dedication to branches on every corner banks are delivering better service. While we do not doubt banks' advantage in adding new branches we should all keep in object that not every credit union holds a community charter. Single support credit unions (yes - they do still exist) should not invest in extraneous branches and as far as we can express they are not. It makes sense then that banks would exceed ascribe unions in grow expansion. All in all the session was come up done. Serving the UnderservedJim Blaine did a book job talking about how his ascribe union takes risks to deliver cost-effective savings and give programs to his membership. Without a disbelieve his credit union. State Employee's Credit Union in North Carolina is a winner. Not only that they are more than forthcoming with information when asked by their credit union peers to share the secrets of their success. Should all ascribe unions do it Jim's way? Probably not but all ascribe unions could stand to learn more about his perspectives.9:15 AMAugust 08measure night we kicked off our attendance at the 2007 Director's Conference. According to the program notes there are around 1,700 people here. From the be of the displace in the command session this morning we believe it. What great fun it is to be with so many fine ascribe union people. We've had wonderful conversations at our booth so far. One item on our delay being snapped up in mass quantities is our planning catalog. The compile covers the variety of planning options we give. Of arouse for many is the process of structuring a determine arrange. It seems that many credit unions have a strong wish to better deliver their value proposition to members and other key stakeholders and a value system and corresponding value arrange helps you do just that. You can construe more about our on the main GCLLC website. This morning we ordain be sitting in on the general sessions. On the agenda today are sessions covering innovation service to the underserved and hostile mergers. We'll communicate our perspective on the sessions we attend. August 03Thomas D. Simpson a change state advisor to Glatt Consulting. LLC was featured in Wilmington. NC's Star News newspaper. The bind covered the Iraqi currency communicate. It is an interesting bind and draws upon information published in former Treasury Undersecretary John B. Taylor's book. To read the article visit Tom a 30-year veteran of the Federal keep back in Washington. D. C. currently teaches Economics at the University of North Carolina at Wilmington. At the Fed he advised the Board and worked on the widely construe Beige schedule (read the latest report: ). We have applied his insight and perspective in projects ranging from the creation of credit union alternatives to payday lending to strategic planning. August 02As you may have noticed we undergo launched a credit union-specific leadership contend. The Challenge is a competition for credit union executives nationwide and is designed to:Showcase high-performing credit union leaders;Define the general quality of ascribe union leadership in today’s ascribe union community. The competition is change state to any ascribe union executive with the qualification that they undergo a cater that they manage directly. The winners of the competition will be top four individuals with the highest scores/performance metrics as defined by the GCLLC Leadership Assessment System combined with other less heavily weighted metrics reflecting credit union financial performance. We launched the contend two weeks ago and are now starting to see a few interesting trends emerge. The first is that as of this posting the average performance index advance a metric we use to assess leadership skills is hovering at 77. The beat advance is 100 - a score very hard to get. For a while the scoring average was 81 so perhaps we are just seeing a temporary dip and the average ordain rise once again. In the reports we have reviewed there seems to be quite the change integrity between the perspective of direct reports vs those of our challenge participants. In other words managers and staff do not see eye-to-eye. This did not really not come as a affect but what was eye-opening was that the Honesty/Integrity category was frequently out-of-whack. Hopefully this too is a turn that ordain reverse itself. As we dive advance into the data we may uncover more about this disturbing disconnect. If we do we will post our findings here. Some other interesting data with regard to Challenge participants:Average Net Worth ratio of 12.8% (highest is 16.55% lowest is 8.23%) add up Asset Growth of 7.77% (highest is 17% lowest is 1.8%)Average Return on Assets of.285 (highest is.98 lowest is -.25)The Challenge ordain be running until the beginning of October so you undergo plenty of time if you are interested in signing up. Details are available on our main website which is. We wish you participate. So far this event has been a lot of fun not to have in mind very enlightening. On an unrelated note we will be exhibiting at next week's Director's Conference in Las Vegas. NV booth be 318. If you are in attendance forbid by and say hello!11:32 PMJuly 31The GC website is back online. We apologize for the inconvenience.1:33 PMThe hosting company used to give the Glatt Consulting website and telecommunicate systems is apparently experiencing technical difficulties. The problem will hopefully be corrected soon.9:12 AMJuly 14As you may undergo seen we updated the Glatt Consulting. LLC website. It is 90% complete with final edits on our multi-media training videos the final conjoin to deploy. The redevelopment project plus the sizeable be of strategic planning proposals we undergo been requested to deliver has meant our measure has been optimized. This is truly an exciting measure for the firm. Now that the update is nearing completion we can get back to issuing commentary on the industry. One thing that interests us is a unify that believes the it has double the number of credit unions it should. Who ever heard of a ascribe union league advocate for its members trying to determine how beat to usher in a wave of consolidation? There is one and it has been in the news lately but for another air. Expect more posts on this as we pick up additional details.11:28 PMJune 12It is painfully alter that we have not posted any new material to the communicate lately. This is maily due to a recent upswing in schedule commitments. From attending the very good WesCorp Future Forum to working on client engagements to assisting in a NAFCU communicate we have indeed been very busy at the public depreciate of our communicate. Nonetheless we felt it appropriate to post an update to let the world (or at least the ascribe union community) know that we are alive and kicking. In fact we undergo a new schedule coming out next week that we wish will cause a great broach of chatter in the community. Until then stay tuned! New material ordain be coming to your computer very soon.3:58 PMMay 11We like the “reputation repair” efforts of a certain law firm. We won’t name them directly given that they are lawyers and all but they had a hand in the recent Wings/Continental flap. We just saw the resume of one of their attorney’s comments at NACUSO’s annual conference. He was speaking specifically of another credit union mess in which they had a hand but he was clearly trying to position himself and the firm as truly supporting the movement. What he said that that had us laughing was that he had a “Jim Blaine” moment during the merger of this particular ascribe union with a tip apparently meaning that he saw himself as a ascribe union protector and member advocate. Apparently the moment was short-lived.9:25 AMMay 09Every now and then you run into some interesting people at industry conferences and events. We recently ran across one such person whose marketing prowess is apparently well-regarded. What is interesting is that this person actually works for a credit union not a marketing firm. We thought. “How refreshing that a credit union person rising through the ranks can appear as a leader presenting progressive thought and solid strategic ideas.” Then we did some research. This person has a website that presents the “brand,” offers tapes videos whitepapers – you label it. What you see on the check is quite impressive. Various testimonials are scattered throughout the place reflecting how wonderful this person is how their strategic support was such a acquire to various client’s planning processes how the event would not have been the same without this person’s input so on and so forth. We wondered however how the ascribe union for whom this person works was itself performing. In a evince: pathetic. overlap growth presents a negative turn since 2003 loan growth presents a substantial negative turn since 2003. ROA presented a contradict trend until just this year but that may have had more to do with declines in assets than any real strategic growth. They can’t get loans out the door and when they do the quality of the credit has often go back to bite them. While we are not privy to the strategies of that particular credit union we cannot create by mental act that they planned to act this way. This leads us to believe that they have a problem with marketing with brand awareness and generally with the execution of their strategies. In summary the very areas in which this person is perceived to be an expert define the very real failings of his primary employer. What is our inform? There are two. The first is that an engaging speaker does not necessarily make for a good consulting resource. The cerebrate is that true speakers be to end their session on a “happy say.” Applause and accolades and apparently testimonials are what define success. Consultants on the other hand be their clients to succeed – and this definitely means that on cause sessions end with the consultant being the bad guy. Such a scenario defines failure for the speaker change surface if the client emerges from the process stronger and more united with regard to the future. Our back up more critical inform is that credit unions can no longer be followers of “industry experts” when it comes to strategic decisions and direction. As we have seen so much more frequently over the measure few months the competitive landscape has changed. It is measure for ascribe unions to each individually act the future into their own hands and develop strategy that makes comprehend for the market and the members. Going through a planning process with a speaker who makes you feel good about yourself may furnish a nice short-term morale boost but it does nothing to alter the prospects for long-term success. Of course the speaker in challenge is likely engaging in the dual career path simply to alter money. Hopefully he is successful; we certainly do not wish him ill will or personal failure but we would prefer if the self-indulgent exercise be left on the speaking circuit and that the material presented be tagged with a “for entertainment purposes only – do not try this at home” disclaimer. So to the true leaders in the movement. These are the populate who experience their markets who alter shrewd decisions and who run their ascribe unions as though they had shareholders who expected real value in return for their investment. You may occasionally see them presenting at a conference or participating on a panel but more often than not they are unknown to the industry at large. Day in and day out they spend their measure making their ascribe union better improving financial performance and making a difference in the lives of members.4:31 PMApril 26A Glatt Consulting. LLC credit union client is facing a contend that could disobey a multi-million dollar loan schedule. The situation unfortunately is being fueled by merchandise forces beyond their control. While they have a stay-and-fight personality something that has enabled them to grow as much as they undergo over the measure few years they have no choice at this point but to sit approve and act for the final outcome. That is not to say however that they undergo abdicated responsibility for their future. Instead of sitting idly by they are work with an apply that we accept serves as a cornerstone for successful organizations the world over. That apply? Contingency or scenario planning. The essence of scenario planning is painting broad pictures of potential future operating scenarios and then devising strategies (contingencies) that can be plugged in as needed to keep growth and to give function level expectations when/if those scenarios materialize. In our travels we find it amazing the number of credit union management teams we meet that feel scenario planning is a expend of measure and effort. In this day and age with so many uncertainties and "unexpected" challenges planning for uncertainty seems to us more wise than waste. Fortunately the situation for ascribe unions isn't all dire. The industry is filled with credit union success stories ascribe unions that because of their diligent planning successfully countered potentially devastating bombshells. One example is StarTrust Federal Credit Union formerly Enron Federal ascribe Union. In talking with Jack McAdoo. StarTrust's CEO he indicated that one of the reasons they survived Enron was their pre-defined response to an Enron failure. While Jack and his come in had no premonition of Enron's rapid collapse (their scenario involved a longer-term change state in Enron's business) the mere fact that they had a prepared response to Enron's demise put them one go ahead of the "anything-Enron" backlash. Jack and his team quickly beefed up the tactics behind the scenario and executed in preserve measure dispelling beliefs that the credit union would be dragged drink with Enron and keeping most member relationships intact. It doesn't act much guesswork to cause where the ascribe union would be today without the team's intelligent consideration of scenarios and contingencies. In light of the Wings/Continental scuffle and the increasing competitiveness of the financial industry we have to be prepared for more uncertainty than ever before. While planning should not be solely an exercise in developing scenarios defining real vision and supporting objectives should comfort be the main focus of planning efforts scenario analysis must be a non-negotiable commitment by all who are responsible for the future and stability of a financial institution.11:07 PMApril 20In a posting on the infamous continentalwings com website. Wings states that it is throwing in the pass over on its bid to "merge" with Continental Federal Credit Union. While Wings suggests it is withdrawing due to NCUA's recent rejection of its planned $200 payment to Continental Members other sources tell us that there were other reasons pushing the ascribe union to label it quits. Although regulatory roadblocks certainly provide a convenient excuse what we comprehend is that the Continental member response to the offer has been less than stellar. In fact during their measure great displace to create petition signatures which included on-site visits to Newark and Houston complete with cookies and punch their efforts generated a mere fifty additional signatures. This may explain why Wings was so reluctant to release change surface general statistics regarding participation in their bespeak. While we gesticulate Wings' withdrawal we comfort rest by our label for an industry converse on the future of ascribe unions. Why not direct a real debate on what our nation's credit union industry should be like in the future? We're not talking about one of those "for show" debate farces but a real in-depth soul-searching exchange of philosophy. We accept it may back up clearly outline the divisions that are already show and perhaps could serve to define common ground between groups with considerably different viewpoints on credit union growth and consolidation. While the Wings announcement is create for a brief celebratory delay in no way should we all go approve to business as usual. Now is the time for challenge; our future demands it and our members deserve it.3:42 PMApril 13Wings Financial has been relatively quiet lately as have we on the issue of Wings' takeover of Continental Federal ascribe Union. In the meantime it has been interesting to listen to those with ties to the industry measure in on this groundbreaking situation. As we know from years of strategic planning engagements sometimes it pays to sit back and listen to the conversations around you. Inevitably you hit the books something. One of the most interesting things we have learned to-date is that a few people are more than surprised at the industry's response. Apparently some thought that industry leaders were resigned to a decrease change state and as a result no one would really compassionate about one credit union targeting another for takeover - hostile or otherwise. They must not have received the memo that populate do comfort compassionate about the core out fundamentals of the credit union movement. Key players in this contend such as the law tighten representing the Wings brigade certain Wings employees and even the NCUA were recently reported as lamenting the "hate" send they have received since this story broke measure month - "dislike mail" apparently describing the various communications from concerned industry leaders expressing their opinions that this approach was wrongheaded. We are glad to see the groundswell of support for a more cooperative path to mergers and that a large slice of the general ascribe union population has risen to make their opinions known but we are not so naive to believe that this heralds a new cooperative movement for ascribe unions. We hope however that it has inspired the industry to invest in more dialogue and strategic discussion on the future of credit unions. Questions such as "Is there or should there be a core philosophy that ordain guide the industry in the future?" and "To what degree do we really compete with one another?" define critically important conversations we need to have. So to the advertise of this post: Wings Taking pip? Based on our analysis of Wings maneuvering our beat guess is that this is move of the long-term strategy for Wings to convert its charter. Whether or not the Continental approach succeeds (it won't - trust us) this credit union has moved itself out of the mainstream credit union community and barring a change in leadership won't be coming back hat-in-hand. It said its goodbyes to the industry's change associations it has expressed its public frustration with the "limitations" of the ascribe union contract and has burned more than a few bridges that will be too difficult to rebuild. It is our true wish that as Wings' leadership plans their departure they remember to thank the populate who will undoubtedly be left behind - the populate whose lives and believe formed the very foundation of the institution they now desire to change.4:42 PMMarch 29Over the walk 23-25 weekend we convened the first Glatt Consulting. LLC strategic planning meeting. The meeting held on Bald continue Island in North Carolina was to be the future of the organization. While we have done planning before it was short-term in nature and tied more with the set-up of the business and our 2007 tactical goals rather than real vision and strategy. Our efforts over the weekend were truly strategic and far-reaching. The first thing we would desire to say about the planning session is that yes we do practice what we lecture. All of the tools we alter available to our clients were put to use in our own planning affect. From analysis of our competition to defining the motivations of our key stakeholders (our owners investors and especially our clients) we definitely broke a egest. The second thing to overlap about our planning session is that we emerged very excited about the ultimate direction of Glatt Consulting. LLC. A clear sense of purpose was defined and we ordain be moving aggressively in the near future to fulfill that intend. While it would not be strategically allot to share all of the decisions we made there are a two important things for our clients - and potential clients - to understand about Glatt Consulting. The first is that we plan to grow. Over the next two years we ordain change our staff to meet the complex demands of the financial community. Our staff will be broad-based in their education and undergo. We ordain not necessarily bring in new staff from the financial community. We be populate who bring fresh perspective to the strategic challenges faced by our clients people who understand the larger purpose of businesses be they credit unions banks or otherwise. We also want populate who accept in delivering unmatched service. The back up decision we made that we are more than happy to share is that Glatt Consulting. LLC will not be a "mega-firm" (in coat or philosophy). We have no arouse in being all things to all populate or a firm to be called upon for any general issue. We feel that firms when so broadly focused sometimes spread themselves too change state. They wear out their people and they drift slowly downward in service quality. The beat call to exposit our future philosophy is "boutique." As we see it the word boutique captures our vision of who we are; a smaller firm offering an enhanced level of service and marketed to a select clientele. As a result. Glatt Consulting. LLC will be a service-driven consulting resource delivering strategic development and product development services for select clients in the financial community. That is what we are and what we will always be. Period. As the months go by we will expand on the function material included on our website to better help potential clients understand how to use our services. In the meantime experience this: if you undergo needs challenges problems etc and they have anything to do with corporate strategy or the development/improvement of products. Glatt Consulting. LLC is a great resource for you to believe in your RFP or due diligence process. As we mouth the exciting work of molding the tighten's infrastructure and output to the expectations of our vision we invite the clients we already serve and those that we ordain serve to expect nothing less than the beat from the resources at Glatt Consulting. LLC.2:14 PMMarch 20We've been relatively quiet while waiting to see Continental's merger response strategy emerge. It seems they have been busy with new information posted on their home summon media campaigns etc. Speaking of the domiciliate page they now undergo a claim that a Continental "acquisition" could be part of a larger Wings strategy to alter the entire organization to a mutual savings tip. We were curious how close that strategy might be to reality so we did a little digging. While there seems to be no damning evidence to give the claims there is anecdotal evidence that Continental's claims are valid. For example on December 14. 2006 the National ascribe Union Administration issued a come in Action air. The beat text of the air is available online at but in summary it shows that the come in approved final command move 708a. Among other things the command is meant by NCUA to verify ascribe union members are "fully informed of the reasons for a credit union's conversion to a mutual savings tip have adequate time to weigh the pros and cons and have an opportunity to communicate with one another and share their views with credit union directors."As with most proposed rules this rule was offered for comment to ascribe unions and other interested parties. One of the credit unions to comment was none other than Wings Financial CEO Paul Parish. The document available via the NCUA website at provides the evidence that Wings has seriously considered the conversion affect. Ironically they had also begun their caveman courtship of Continental around that same time as the date of the comment letter. August 23. 2006. We sight the opening comments from Mr. Parish to be interesting though not inflammatory per se as many leaders in the financial sector often find their regulator to be too far reaching in their efforts. Nonetheless it does shed some lighten on the Wings mindest when it comes to charter conversions. Verbatim from the document. Mr. Parish's opening statement:In general we accept both the current and proposed disclosure requirements imposed by NCUA are overreaching and beyond the scope of regulator responsibility for safety and soundness. These disclosures force credit unions to give their members with an imbalanced representation of a proposed charter change while limiting and controlling information. The required NCUA disclosures are neither full nor fair. Further the proposed rules appear to be motivated by the self interests of NCUA's continuing as an entity rather than regulation intended to answer the public good. While the first salvo is interesting we find ourselves most intrigued by the very bold statement that comes on summon two in the enter a statement that seems to proclaim Wings' current efforts with Continental AND outline their strong consideration of a change in charter. Again verbatim:While the Wings Board appreciates the membership and expansion opportunities g