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Data privacy and proxy discrimination are far from settled issues for insurance companies.

Executives agreed during a risk appraisal forum at NAILBA 43 that future state-based regulations are sure to impact underwriting.

The entire insurance underwriting landscape changed with the introduction of big datasets, explained Dr. Thomas Ashley, senior vice president and chief medical director for Gen Re.

“Regulators were fine with risk assessment according to what they’re now defining as traditional underwriting – medical, many non-medical things,” he said. “People could connect the dots fairly readily between multiple DUIs and higher risk of mortality, or a heart attack and a higher risk of mortality.”

“Big Data comes along, and now it’s opaque. I have a high score, and that means that I’m paying a higher premium. Well, why is that? What’s the connection? And there’s no way to define the connection.”

High standard in Colorado

Colorado set a high standard for compliance with its 2021 law restricting what insurers can do with “external consumer data and information sources” in rating algorithms and predictive models. The law attempts to head of discrimination, particularly on race.

Insurers are required to develop a risk-based governance and risk management framework, including documentation, oversight and regular reviews.

“The regulations are still being formed, but it’s clear that in Colorado, every insurer who writes policies in Colorado will have to submit a report showing their racial distribution results,” Ashley explained.

Many consumer advocates and regulators turned their attention to proxy discrimination during the summer 2020 following the murder of George Floyd by a Minneapolis police officer. Proxy discrimination occurs when a facially neutral trait is used as a stand-in for a prohibited trait.

Consumer advocates want to see greater protections for victims of proxy discrimination, or unintended “disparate outcomes” that can accompany the collection of personal data. For example, for decades some financial institutions used ZIP codes and neighborhood boundaries in place of race to avoid lending to neighborhoods that were predominantly African American.

“There’s so many problems with this guessing at race, really simple problems,” Ashley said. “Like many women no longer have the name that’s associated with their ancestry because they got married. Just things like that. If your zip code is 90% Black, the algorithm is going to say you’re Black no matter what your name is.”

The National Association of Insurance Commissioners established a Special Committee on Race and Insurance after Floyd’s death, and it continues to meet regularly. Regulators also guidance for accelerated underwriting and use of artificial intelligence.

‘It’s too simple’

Life insurance companies are in a difficult spot in some respects, Ashley noted. Age discrimination is part of the product and life insurers wouldn’t make any money if they couldn’t charge older consumers more money. Likewise, Black Americans have a life expectancy of about 73 years, or four-and-a-half years less than whites.

“But it’s too simple to say that Blacks have a higher mortality rate than whites, because there are a lot of things that go into that,” Ashley explained. “Blacks have higher rates of many diseases, and if you control for disease, and if you control for socioeconomic status, I think that there no longer is such a clear case that race, per se, affects mortality.”

On the heels of the Colorado legislation, the New York Department of Financial Services issued a circular letter to all state insurers in order to identify its expectations on the management and use of artificial intelligence systems and other predictive models in underwriting.

Absent a strong model regulation from the NAIC, states are likely to pursue different rules, which could create problems for insurers.

John Jonassen is senior vice president, chief underwriter and head of claims at Security Mutual Life Insurance Company of New York. As different states come out with regulations, “we’ll just look at all the commonalities and address those,” he said. “Hopefully there’ll be more commonalities than not.”

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WINDSOR, Conn., Nov. 25, 2024 — Representing 45% of U.S. annuity sales, record-high fixed indexed and registered index-linked annuity sales propelled the continued growth in the U.S. annuity market in the third quarter.

Total annuity sales increased 30% year over year to $114.7 billion in the third quarter 2024, according to LIMRA’s U.S. Individual Annuity Sales Survey, which represents 92% of the total market. In the first nine months of 2024, total annuity sales increased 23% to $332 billion.

“This was a strong quarter for U.S. individual annuity sales. All product lines posted double-digit increases, and overall sales were less than 1% lower than the record-high sales set in fourth quarter 2023,” said Bryan Hodgens, senior vice president and head of LIMRA research. “While interest rates have declined, heightened market uncertainty will likely continue to draw investors seeking principal protection and guaranteed growth. LIMRA expects annuity sales to set a new record in 2024.”

FIA sales

For the third consecutive quarter, FIA sales set a new record. FIA sales were $35.2 billion in the third quarter, up 56% from the prior year’s results. Year-to-date FIA sales increased 34% to $95.1 billion.

“Strong equity market performance and a desire for principal protection continue to attract investor interest in FIA products,” said Hodgens. “To remain competitive, carriers are refining their indices and introducing more lucrative crediting options.”

RILA sales

For the sixth consecutive quarter, RILA sales set a new quarterly record, totaling $17 billion in the third quarter of 2024, growing 35% from the prior year. YTD, RILA sales were $47.9 billion, 39% higher than the same period in 2023.

“In the first nine months of 2024, RILA sales surpassed the total RILA sales collected in 2023 ($47.9 billion vs. $47.4 billion), noted Hodgens. “LIMRA expects RILA sales to remain strong through 2025.”

Fixed-rate deferred annuity sales

Fixed-rate deferred annuity sales were $40.3 billion in the third quarter, a 17% increase from third quarter 2023 results. In the first nine months of 2024, FRD sales totaled $124 billion, up 17% year over year.

“While FRD sales growth remained strong through the third quarter, our October preliminary figures suggest sales are beginning to soften in the face of repeated interest rate cuts (in September and November),” noted Hodgens. “That said, FRD contracts still offer higher yields when compared with other short-term investments. If market volatility increases, LIMRA expects there will continue to be an increased demand for FRDs with clients seeking principal protection.”

Income annuity sales

Single premium immediate annuity (SPIA) sales were $3.5 billion in the third quarter, 20% higher than the prior year’s results. In the first nine months of 2024, SPIA sales rose 8% to $10.5 billion.

Third quarter deferred income annuity (DIA) sales were $1.3 billion, a 41% jump from sales in the third quarter 2023. In the first nine months of the year, DIA sales grew 33% to $3.8 billion.

Traditional variable annuity sales

For the third consecutive quarter, traditional variable annuity (VA) recorded sales year-over-year growth. Traditional VA sales were $15.1 billion in the third quarter, 16% higher than third quarter 2023 results. YTD, traditional VA sales totaled $44.2 billion, a 13% gain year over year.

For more details on the sales results, go to Annuity Estimates (2024 Third Quarter) in LIMRA’s Fact Tank.

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The health care sector represents one-fifth of the U.S. economy, and the federal government regulates much of it. What will a second Trump term mean for health care? A panel of industry observers discussed potential changes during a webinar by the University of Southern California School of Journalism.

Medicaid and the Affordable Care Act enhanced premium tax credits are two health care issues that are most likely to be impacted by a new administration, the panelists said.

Many in Washington expect to see imposing Medicaid work requirements for able-bodied adults who receive coverage through the program, said Dan Diamond, Washington Post national health care reporter. Imposing work requirements could come from an act of Congress as congressional Republicans seek ways to offset revenue lost by extending individual tax cuts. Or the Centers for Medicare and Medicaid Services could give individual states permission to impose work requirements. Imposing work requirements on Medicaid recipients could result in 600,000 people losing coverage, he said.

ACA tax credits are a crucial factor in getting people enrolled in marketplace coverage, said Sara Owermohle, Washington correspondent for STAT. The Inflation Reduction Act of 2022 extended ACA enhanced premium tax credits for three years but they will expire next year unless Congress acts.

“Those subsidies were a big part of millions of people getting enrolled in ACA coverage,” she said.  A total of 45 million Americans are enrolled in coverage related to the ACA, the highest total on record.  This represents 14.1 million more people enrolled than in 2021 (a 46% increase) and 32.5 million more people enrolled than in 2014 (a 258% increase, or more than triple).

Owermohle cautioned that Vice President-elect JD Vance campaigned on the concept of dividing Americans who have ACA coverage into two risk pools – one for young and healthy individuals and another for older and sicker enrollees.

The ACA was nearly repealed in Congress in 2017 but two issues saved the bill, said Joanne Kenen of the Johns Hopkins Bloomberg School of Public Health. Those issues were expanding Medicaid in the states and keeping coverage for those with preexisting conditions.

“Now what they’re talking about is creating two risk pools – so you’ll still be covered but will it cost you more?” she asked. “Right now, the ACA has spread out that risk.”

Because Medicaid is an open-ended entitlement, the program is a target for lawmakers who want to curb its cost, Kenen said. Republicans have suggested replacing the current program with a block grant or a per capita grant, limiting the growth rate of Medicaid or giving states a smaller budget for the program.

Kenen noted that Medicaid also is a major payor for long-term care and nursing homes, and cutting the program would impact the nation’s vulnerable elderly.

“It’s expensive to cover sick people,” she said. “Doctors, nurses, the entire health care system would rather have people covered. If you have more uninsured people, it has ripple effects throughout the entire health care sector.”

President-elect Donald Trump nominated Robert F. Kennedy Jr. as Secretary of Health and Human Services with the goal to “Make America Healthy Again.”

Diamond said that Kennedy’s agenda is focused on combating chronic disease. “[Kennedy] has a point that chronic disease is a killer in America, it’s a major factor in our death rates, but there’s a lot to do with running HHS that has nothing to do with anything that was said during the campaign,” he said.

“We might not know where he stands until he gets installed and starts rolling out policies.”

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A small Mississippi life insurer offering the highest annuity rates in the 5-year MYGA market is drawing concerns over its financial condition.

Upstream Life Insurance Co., based in Oxford, Miss., was fined $25,000 by the Texas Department of Insurance in August after regulators concluded that the insurer “misrepresented and filed false and misleading account statements and false quarterly and annual financial statements” with the state.

Upstream “was also operating in a hazardous financial condition,” Texas regulators wrote in an Aug. 5 consent order.

AM Best was apparently unaware of those problems when it assigned a Financial Strength Rating of B- (Fair) and a Long-Term Issuer Credit Rating of bb- (Fair) to Upstream on Sept. 9. The rating service abruptly reversed itself last week, downgrading those ratings to C++ and b, respectively.

In response, Upstream requested to “no longer participate” in AM Best’s rating process and the ratings were withdrawn.

“The ratings reflect Upstream Life’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and weak enterprise risk management (ERM),” Am Best wrote in a news release.

The Texas findings “exposed gaps in the corporate governance of the company and contributed to the ERM program being assessed as weak,” the release said.

Upstream was started by partners Colby Arceneaux and Derek Hebert in 2018, according to a 2021 Inc. profile. The partners turned Upstream into the No. 3 fastest-growing private company in America that year, Inc. reported. In 2020, the fledgling insurer booked $194 million in revenue.

Upstream is on a strong financial footing, Hebert said on Thursday. The partners declined to provide additional comments.

Strong MYGA rates

Meanwhile, Upstream continues to sell multi-year guaranteed annuities (MYGAs), which is its only product line. The insurer had sales of $35 million through the second quarter, reported Sheryl Moore of Moore Market Intelligence and Wink, Inc.

The number is just a small drop in an $84 billion MYGA market. Like many new companies, Upstream used aggressive rates to attract business. On May 31, Upstream raised rates on its five-year Secure Legacy MYGA to 5.95%. The next-best rate is 5.5% by Heartland National, and most five-year MYGAs pay between 5% and 5.25%

As of Friday, Upstream is still offering its five-year MYGA at 5.95%. But Moore isn’t sure what the future take-up will be for a company that isn’t submitting itself to independent ratings.

“It is going to be a challenge for Upstream to turn their sales spigot back on, as an unrated insurance company,” she said. “I don’t think errors and omissions insurance even covers an agent to write an unrated insurer.”

Texas concerns

The Texas examination of Upstream’s financial books focused on a transfer of funds from Financial Shield of America to Upstream as part of a 2021 reorganization designed to make FSOA a subsidiary of Upstream, the consent order states.

TDI regulators say they were shown a quarterly financial statement through Sept. 30, 2021 indicating that Upstream had bolstered its holdings.

“The quarterly statement indicated that FSOA’s assets were in the name of ULIC, which TDI later discovered was false,” the consent order says. “Without the false claim of ownership of FSOA’s assets, ULIC had inadequate assets and capital.”

Nearly a year later, TDI regulators conducted a comprehensive examination of Upstream’s books and found an auditor’s report indicating that FSOA’s assets were in its own name and not Upstream, the consent order states.

“ULIC represents that despite the assets being in the name of FSOA, the assets remained under the control of ULIC and subject to ULIC’s investment guidelines,” the consent order says.

Upstream officers waived their right to a public hearing and other options. Hebert and Arceneaux agreed to resign as officers, per the consent order.

AM Best also downgraded Upstream’s credit outlook from stable to negative.

“The negative outlooks reflect the potential impact of organizational changes on Upstream Life’s future operations,” AM Best concluded.

Reinsurance in place

On September 2023, Upstream announced a reinsurance agreement to cede “up to $300 million of fixed annuity statutory reserves” to Antarctica Capital, a small investment firm headquartered in New York City.

“The reinsured block may consist of certain durations of the company’s Secure Legacy MYGA statutory reserves over the 2023 and 2024 issue years,” a news release states. “The transaction is expected to improve the company’s capital position, including increases to free cash flow and RBC coverage.”

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With the ease of creating convincing deepfake images and even videos threatening to increase insurance fraud, a Utah-based software company is equipping insurance companies with another layer of anti-fraud protection through automatic deepfake detection.

“With this whole proliferation of generative AI, it’s very easy for people to create fake photos or videos. That’s one of the aspects that our software does very well — it identifies and flags photos and videos that were created with gen AI,” Nicos Vekiarides, co-founder and CEO, Attestiv Inc. said.

Those anti-fraud capabilities translate into a huge ROI for insurers, considering fraud already costs insurers billions every year and the threat of deepfakes is increasing as gen AI becomes more easily accessible.

“If you think about Photoshop, that’s kind of the realm of a graphic artist, maybe a hacker. But with the types of things you can do with generative AI today, you can go to Dolly or Stable Diffusion or Midjourney and you can create pictures, you can take existing photos and make some changes to them, exaggerate damages. All of that has really raised the threat of fraud, particularly in processes that are automated,” he explained.

The increasing threat makes deepfake detection software such as that offered by Attestiv even more valuable for insurtechs, which are in the business of automating more parts of the insurance process.

“When you’re automating things, this is where it becomes very easy to lose sight of the fact that the photos can be fake, videos can be fake, all of the data that you’re processing can be fake. It becomes almost imperative that now you have to really take some precautions against this threat,” Vekiarides said.

Using AI to detect AI

Attestiv’s solution uses AI technology to detect photos, videos and documents that have either been created entirely using AI or manipulated in some way. The company aims for data precision in the high-90s, and frequently updates its data models.

The online platform ranks photos, videos and documents on a score of 0 to 100. Anything scored over 50 is automatically flagged as suspicious for the insurer to take further action.

It’s also offered as an API, where companies can integrate it into apps that even clients can use. Vekiarides believes this is where the future of such technology is headed.

“How do you make it really easy for customers to consume this technology? Well, integrate it into applications that they already use… Take advantage of self-service so that the policyholder can take photos in the fender bender or so forth. That really enables insurance companies to get this instant fraud identification or instant identification of suspicious items in a claim without necessarily making any big changes to their process,” he said.

Companies already taking advantage

According to Vekiarides, an increasing number of insurtechs have expressed interest in Attestiv, and the company is preparing for “a pretty large launch with a claims provider.” It already partners with companies like Repwest, Insurity and PCMS.

Repwest provides the insurance for well-known moving company U-Haul.

“With us, they’ve launched an online process where the renters or claimants can submit their photos online. Once they get submitted online, they first go through the Attestiv process and if we find something suspicious within a claim, then it gets flagged for further attention. If we don’t, then it can go through a little bit of a faster claims processing,” Vekiarides explained.

Insurity and PCMS, meanwhile, have integrated Attestiv’s technology directly into their existing claims systems through APIs.

“Insurance carriers who use these systems don’t need to change their processes anymore. They can simply run their processes the same way they did before, except they will get an Attestiv report with every claim that tells them whether there is anything that we found that’s suspicious in the claim,” Vekiarides added.

‘Enhancing’ the insurance ecosystem

Michael Desrochers, VP, strategy & growth, PCMS, said his company sees great value in the “unified technology solution” offered by Attestiv.

“Where I see this technology being very beneficial is to the actual company or insurance entity that is going to be writing the risk, handling the risk. So, if you are a carrier, an insurance carrier, I think it’s great from the underwriting perspective to take more preventive measures,” Desrochers said.

For instance, he noted specific instances where it could be beneficial for P&C purposes, such as to insure an expensive jewelry item or verify damage claims after a hurricane. However, he suggested it could even benefit a life insurance agent, as a document-tampering detection ability could be used to validate documents such as wills.

“Having the ability to leverage AI-powered technologies to prevent fraud or to detect fraud is really a value to us as a solution provider to these carriers. Having someone like Attestiv integrated in our solution really enhances our ecosystem, and it is an augmenting capability piece,” he said.

Attestiv is a private software company founded in 2018 and based out of Lehi, Utah. Its cloud-based platform aims to ensure authenticity of digital assets.

Property & Casualty Management Systems, Inc. is an American insurance company founded in 1999. Based in Dallas, Texas, it offers P&C insurance software solutions to small and medium-sized carriers.

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The Centers for Medicare and Medicaid Services is using algorithms that “seem to go after good agents who are minority agents and, therefore their minority communities,” the CEO of a health insurance agents association told a National Association of Insurance Commissioners working group.

Ronnell Nolan, president and CEO of Health Agents for America, told the NAIC Improper Marketing of Health Insurance (D) Working Group how flaws in CMS’ algorithms and online enrollment platforms have contributed to fraud and unfairly targeted agents.

In March, the working group aired its concerns about consumers who say their ACA plans were switched without their consent.

HAFA warned that CMS enabled enhanced direct enrollment platforms to operate with applicants for Affordable Care Act coverage to provide only name, date of birth and state. These minimal information requirements created a vulnerability that could be addressed to prevent fraud but has not been addressed, Nolan said.

“Plus, the current administration allowed anyone at 150% of federal poverty level to change plans during the year. It allowed fraudulent entities to come in, go into that EDE spot and make changes and most consumers did not know until they got to the doctor that their plan had been changed.”

Nolan contended that implementing a two-factor authentication process on the platform “would have fixed it right there and stopped all the fraud that’s been happening.”

Because CMS did not adopt two-factor authentication was not adopted, the agent force is facing challenges, she said.

Nolan said CMS is using algorithms that contain flaws, disproportionately targeting minority agents and the communities they serve. Agents are being targeted by CMS, deemed guilty without being afforded due process or a formal appeal procedure. This is resulting in the immediate loss of their ability to sell, access their client base and maintain their income – all without substantiated proof of fraudulent activity.

“CMS is targeting good agents – not bad agents,” she said. “We want the good entities to stay and the bad entities to go away. We can no longer stand by and watch agents be taken down one by one.”

CMS says switching complaints on the decrease

Meanwhile, CMS has received fewer complaints about unauthorized plan switches over the past several months, Gina Zdanowicz, CMS deputy director, marketplace plan management group, told the NAIC panel.

CMS has implemented three changes to combat plan switching, she said. The first change is to block the activity of an agent who has not previously worked with a consumer. CMS also is blocking the most common instances of duplicate applications. A requirement to include a validated Social Security number when applying for coverage also was implemented.

“Looking ahead, we will continue to monitor misleading marketing,” she said. “While we don’t have authority over lead generators or marketing firms, we continue to work with the Federal Trade Commission on this issue.”

Zdanowicz said CMS has suspended the ACA marketplace agreements of more than 800 agents and brokers. The agency is reviewing rebuttals and reconsiderations from those agents.

Dealing with misleading Medicare Advantage marketing

CMS also has been dealing with misleading marketing of Medicare Advantage plans and Molly Turco of CMS gave the NAIC group an update on those efforts.

“We were especially concerned about the proliferation of certain TV ads” that contain misleading claims about Medicare Advantage benefits, she said.

CMS has prohibited ads that do not mention a specific plan name, and ads “that use words and imagery that may confuse beneficiaries and lead them to think that the ads are coming from the federal government,” Turco said.

The agency also implemented rules such as “cooling off periods” after conducting outreach to Medicare beneficiaries.

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Greg Lindberg, former head of Bankers Life Insurance Co., and convicted of a multi-billion-dollar bribery and fraud scheme, wants to serve his sentence at a cozy halfway house near his home in Tampa, Florida, instead of federal prison. But government prosecutors say, “no way.”

In a filing with the U.S. District Court for the Western District of North Carolina, prosecutors said Lindberg’s desire to to be housed in the facility of his choice should be denied.

“Placement in a [residential reentry center] RRC is not detention,” wrote U.S. Attorney Dena J. King. “It is an alternative to detention and a condition of pre-trial release.”

Lindberg, convicted for a second time in May of trying to bribe North Carolina Insurance Commissioner Mike Causey, changed his plea to guilty earlier this month and has pledged to help a special master unwind his billions of dollars in holdings to pay back victimized policyholders. His attorneys said housing Lindberg at the reentry center would make it easier to conduct the asset transfers.

Lindberg lawyer makes his case

“Mr. Lindberg’s ability to help facilitate the duties of the Special Master and take the actions necessary to complete the transfer of assets will require constant communication between Mr. Lindberg and his counsel,” wrote Lindberg’s attorney James F. Wyatt, III. “It will be virtually impossible to do so on an expedited basis while incarcerated in a local jail or prison—as those facilities pose significant barriers to communication. Detention at an RRC will allow Mr. Lindberg to fulfill his obligations to make restitution to policyholders prior to sentencing—as required by his plea agreement.”

Lindberg also told the court that he “has eight children under the age of seven who currently live with him in Tampa” and that he “is the sole parent providing care for these children as his fiancé Olivia Molina does not have a U.S. visa and lives in Spain.”

But government prosecutors say Lindberg has already consented to detention while he
awaits sentencing.

“If Defendant wants to withdraw that consent and instead seek a modification of his conditions of pre-sentencing release, he should say so and the parties should move forward to consider the reported bond violations in both cases,” the government’s filing states.

Judge may lack authority

Moreover, prosecutors say the judge in the case likely lacks the authority to determine where the defendant will be imprisoned, leaving that decision up to the United States Marshall Service.

The government also noted that location monitoring devices might not be allowed at the Tampa RRC and thus Lindberg would not really be in custody or subject to the probation officer’s monitoring.

“Defendant’s specific request to be placed in the Tampa RRC because is primarily based upon the Defendant’s convenience and desire to be close to his family, and not on any issues worthy of the special treatment requested,” prosecutors said. “Defendant’s desire to be housed close to his home and family are shared by nearly all defendants that come before this Court. There is no reason to treat this Defendant differently.”

It is not known when the judge will rule on the requests and the government’s opposition.

A federal grand jury indicted Lindberg and two co-conspirators of illegally siphoning millions from his insurance company for his personal use and then lying to regulators to hide the scheme. Lindberg’s original sentence, for which he served 633 days behind bars, was vacated due to improper jury instructions. He now faces 30 years in prison after the second guilty verdict.
Lindberg founded the private equity firm Eli Global and eventually acquired several insurers grouping them as the Global Bankers Insurance Group. Insurance profits soared and enabled Lindberg to funnel $2 billion to Eli Global, according to a Wall Street Journal report. That attracted regulators and initiated Lindberg’s downfall.

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President-elect Donald Trump said he would nominate Dr. Mehmet Oz to lead the Centers for Medicare & Medicaid Services.

CMS operates or oversees health-care programs that provide coverage to about 1 out of every 2 Americans, including Medicare, Medicaid, the Children’s Health Insurance Program and the Affordable Care Act marketplace program Healthcare.gov.

Oz, if confirmed by the Senate, would head up an agency within the U.S. Department of Health and Human Services. The four main CMS programs mentioned above account for $1.6 trillion in federal spending – nearly 25% of the federal budget.

“Our broken Healthcare System harms everyday Americans, and crushes our Country’s budget,” Trump said in a statement announcing his intention to nominate Oz.

‘The best results’ promised

“Dr. Oz will be a leader in incentivizing Disease Prevention, so we get the best results in the World for every dollar we spend on Healthcare in our Great Country,” Trump said. “He will also cut waste and fraud within our Country’s most expensive Government Agency, which is a third of our Nation’s Healthcare spend, and a quarter of our entire National Budget.”

Oz is the son of Turkish immigrants and graduated from Harvard University and the University of Pennsylvania.

In 2001, Oz became a professor of surgery at Columbia University, and later retired to professor emeritus in 2018.

He became a media figure in 2003, with the Discovery channel TV show, Second Opinion with Dr. Oz. He caught the attention of talk show mogul Oprah Winfrey, making 60 appearances on her syndicated talk show. From there, he branched out into his own show, The Dr. Oz Show, which ran for 13 seasons beginning in 2009.

During his time on TV, Oz was controversial for promoting what some called misleading and false claims about health and science, particularly for his touting the use of hydroxychloroquine to treat COVID-19. He owned stock in two companies that produce the drug.

Oz was the Republican candidate for the U.S. Senate from Pennsylvania in 2022 but lost the election to Lt. Gov. John Fetterman.

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More than half (53%) of investors believe that having a written financial plan is important, up from 41% of retail investors as of year-end 2014, according to new research from Cerulli Associates and Osaic, Inc., Financial Planning: Fueling Client and Business Growth.

Financial advisory practices that incorporate comprehensive wealth management and planning services see longer-lasting client relationships, bolster upmarket growth, and manage wealthier clients, according to the report.

The increased demand for planning is driven by various factors, including greater market volatility, the continued decline of employer pensions as a funding mechanism for retirement, and a growing array of complex investment vehicles.

“Financial planning and advice services are now a vital consideration for investors when choosing an advisor with whom to work, nearly surpassing investment performance as a factor,” said Andrew Blake, associate director with Cerulli Associates. “According to the research, 55% of investors consider an advisor’s understanding of their financial goals, needs, and risk tolerance, as well as their entire financial picture (49%) when choosing a financial advisor, as compared to the performance of their investments relative to the overall market (46%).”

“I think there are a variety of factors that are causing the higher demand, including advancements in technology that make financial plans easier to implement and follow,” added Andrew MacDougall, director of wealth management at Sapers & Wallack, Inc. “Additionally, with economic uncertainty and high inflation, people don’t know if they can live their current lifestyle and want someone to take a second look. Other factors are increased awareness of financial literacy, complex financial strategies, tax planning, and many more,” he said.

For Evan Potash, executive wealth management advisor, TIAA, demand for financial plans has risen over the past decade due to a variety of factors. For example, he said, baby boomers born from 1946-1964 make up over 20% of the population. Many of them are either close to or have entered retirement.

Also, financial institutions have more avenues, besides television and newspapers, to advertise the benefits of having a financial plan, and the rise of social media has made it easier to communicate with consumers, he said.

Benefits of providing comprehensive services

In addition, the report said advisors who specialize in comprehensive wealth management have significantly larger average client sizes and assets under management (AUM) per practice than those providing financial planning on an issue or a per case basis. Private wealth manager advisors, defined as practices that offer comprehensive wealth management, manage $822 million, on average, versus $210 million for case-based planners, service a greater proportion of high-net-worth (HNW) clients (37% versus 7%), and manage an average client portfolio of $1.8 million, versus $562,000.

“With client demand for financial planning increasing and the majority of retail investors considering a financial advisor’s planning-related services as an extremely important factor when selecting an advisor, the service offering provides an opportunity for advisors to differentiate their practice beyond investment performance,” said Blake. “Just less than one-third (31%) of financial advisor practices provide a wide range of core financial advice services as an integral part of their value proposition, creating ample opportunity for advisors to gain a competitive advantage.”

Taking the steps necessary to transition from an investment management-oriented service model toward a financial planning and advice-oriented service model will not come without challenges for many practices, the report said. However, Cerulli’s research indicates that the benefits may be worth the effort as investor demand for this service grows.

“Relationships are at the core of our business, and advisors whose practices incorporate comprehensive wealth solutions into their service model often results in deeper and longer-term connections as they work with clients holistically on their larger financial picture instead of individual needs,” said Joe Gaeckle, head of the National Planning Institute at Osaic. “Osaic is committed to continuous education, and we empower our advisors to build upon their expertise through programs like Wealth Advisor Academy to further grow their practices.”

Cerulli believes that many advisors should evaluate how their wealth management service offering is satisfying the growing demand and consider gradually adding more services to move further along the service emphasis spectrum. “Advisors who don’t currently provide financial planning and advice services don’t need to make the transition all at once. Small steps can be taken toward incorporating financial advice and planning into a practice’s service model and familiarizing clients with the value proposition of services,” Blake said.

Hallmarks of an effective written financial plan

So, what are some of the hallmarks of a written financial plan that helps an advisor’s clients achieve their financial goals? “Comprehensive overview, personalized goals and easy-to-implement actionable steps, I believe, are traits that are pivotal in helping a client achieve their financial goals,” MacDougall said.

A financial plan looks at a person’s goals and separates them into three categories: needs, wants, and wishes, said Potash, as he shared the hallmarks of a comprehensive written financial plan. “Once the needs are satisfied, I ask my clients to start dreaming bigger. Given a client’s resources and day-to-day expenses, there may be an opportunity to start to incorporate less essential goals like travel, charitable gifts, or a large purchase,” he said.

A financial plan addresses these goals and resources, and stress tests them using a financial modeling approach typically called Monte Carlo simulations, which is where we incorporate a client’s tolerance for risk, added Potash. He pointed out that TIAA uses 100 years of data to run 500 of these simulations. “A lot has happened in the last 100 years; so, it is reassuring to have data on major events, such as the Great Depression and the financial crisis of 2008, to stress test the financial plans we put together for our clients,” he added.

However, these are just projections, added Potash, and it is important to understand the assumptions used in the plan. There are many assumptions like inflation, assumed rates of return, and financial forecasts that must be considered. Clients who engage in financial planning typically feel more confident toward the attainment of their goals, including pre- or post-retirement goals, he said.

A trusting and transparent relationship formed between the advisor and the client is essential, and a client’s annual monitoring of the financial plan is necessary in ensuring they are still on track to meet their goals, as there is always a possibility for unforeseen events to happen, which can change their plan and goals. “Having a professional you can turn to is invaluable,” he said.

According to Potash, the hallmarks of a effective written financial plan include:

1. Client expense goals (Needs, wants, and wishes)
2. Time horizon of goals
3. Financial resources
4. Risk tolerance and ability to take risk. This includes asset allocation and asset location.
5. Variable and guaranteed income options–systematic withdrawals vs pension, Social Security, and annuities
6. Tax and income planning
7. Budgeting and savings
8. Debt management
9. Estate planning
10. Insurance strategies: life insurance, health care, and long-term care

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Donald Trump will move into the White House on January 20 seemingly with a mandate to go big and bold. After all, he doesn’t have to worry about re-election.

And he’ll have a Republican-controlled Senate and House to carry out his policies.

However, despite his political capital and those advantages, don’t expect the Trump team to prod Congress to tackle the looming Social Security problem anytime soon. If at all.

The issue is just unpopular enough to delay until a legislative correction is unavoidable, said Brad Campbell, partner with Faegre Drinker Biddle & Reath.

“We should be addressing it this year,” he said during DBR’s Inside the Beltway webinar Thursday. “So far, we’ve heard crickets and I suspect we’re going to hear crickets for the next two years. I think if this issue gets addressed, it won’t be seriously considered, probably until … year three.”

Unless Congress acts, Social Security’s primary trust fund will be depleted in 2033, according to a 2024 report by the trustees. When that happens, each beneficiary will see their benefit cut immediately by 21%.

Lawmakers have known for decades that Social Security’s finances are unsustainable. The program will be an estimated $23 trillion short over the next 75 years, a gap between projected inflows and benefit payments that continues to grow. Yet, the last major adjustment to the Social Security program came in 1983, when Congress addressed both short-term financing needs and long-term challenges.

‘I’m not optimistic’

When a Social Security bill eventually passes, Campbell expects Congress to follow its traditional defer-and-delay approach to tough decisions.

“They’re probably going to do what they have done in the past, which is raise taxes a little, lower benefits a little, stretch things out a little for … younger workers and come to some way to kick the can down the road another 20 years,” he said. “But I’m not optimistic anyone’s going to do anything on [Social Security].”

Social Security is funded through a payroll tax of 6.2% paid by both employers and employees (for a combined 12.4%) up to a certain level, known as the taxable maximum. Self-employed workers pay the full 12.4% tax. The SSA adjusts this limit annually to keep pace with the average wage index. In 2024, earnings up to $168,600 are subject to the Social Security tax.

Campbell’s longtime webinar partner, Fred Reish, partner with Faegre Drinker Biddle & Reath, agreed that there is “no basis for any kind of a good prediction right now.”

“There are only three things that can be done,” Reish explained, “benefits can be reduced, taxes can be increased and retirement dates can be moved out. That’s it. It’s pretty easy to solve a problem that only has three parts to it, but the political will to do it probably isn’t there in the near future.”

Trump = fiduciary death?

On the Department of Labor front, industry lobbyists are again hopeful that a Trump administration will mean the end of a push to extend fiduciary status to all sales of retirement products.

Not so fast, Campbell warned.

He reminded listeners of the similar sequence of events following Trump’s 2016 election victory. The Obama-era fiduciary rule was in the midst of a lawsuit then and was eventually tossed out by the Fifth Circuit Court of Appeals. The Trump team just stopped defending that rule.

However, the Trump DOL replacement rule that emerged in 2020 re-interpreted retirement plan rollover advice as fiduciary advice, Campbell noted. The Biden administration liked that interpretation and allowed it to stand while the DOL wrote another rule.

The current Retirement Security Rule again attempts to extend fiduciary duty to most sales of annuities and other retirement plan products. It has been stayed by two Texas judges and will likely be struck down, Reish predicted.

It’s anybody’s guess what happens next. The fiduciary issue does not rise to a level that Trump or his immediate advisors pay it much heed, Campbell said.

“I just want people to recognize it’s not as simple as ‘Trump wins, fiduciary rule dies,'” he added. “It’s probably more like ‘Trump wins, long pronounced, drawn-out court fight over fate of Biden fiduciary rule.’

“The Trump administration may do something related but different. We just don’t know.”

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