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New Personal Financial Consulting

January 10, 2019

Our new Personal Financial Consulting practice is rolling out in April 2019.  As an Independent Agent, we will be offering select Targeted Annuity and Life Insurance products to help our clients take advantage of tax saving strategies while helping to meet their business and personal long-term financial cash flow needs and objectives.  This practice unit will operate as Intelligent Direction Insurance Solutions. Our Founding Director Mike Johnson will be heading up this practice.  We will offer annuity and life insurance products from several different highly rated insurance companies, with the main objective being to help our clients construct a well-designed runway to retirement. There are many sophisticated business and personal tax strategies that we and our advising business partners will be able to discuss, which may assist in potentially providing more retirement cash flow while also reducing or mitigating some of the common risks.

Mike’s multi-decade relationships with dozens of CPA’s (and high-end private and public sector clients) identifies him as the clear professional and trusted source to offer annuity and insurance advice with honesty and integrity.  Our firm will present options to individuals and business owners, and their chosen advisors, on how to best meet and supplement their retirement goals with contractually guaranteed life-long risk-free cash flow.   We will not be selling direct investments in the stock market, managing money, offering mutual funds, selling variable brokerage house annuities or selling high commissioned products from low-rated insurance companies.  By not offering these riskier products, it will enable us to focus entirely on offering risk-free positive cash-flow streams and working to mitigate other business and personal financial risks

Increasingly more articles are being published in respected financial publications like Barron’s suggesting that people need to start considering income annuities, deferred income annuities and indexed annuities in order to guarantee safe cash flow in retirement. For example, several recent articles in Baron’s have spoken favorably of “Qualified Longevity Annuity Contracts (QLACs)” and how they are becoming a popular solution to some of the tax damage inflicted by Retirement Account Required Minimum Distributions (RMDs) that occur at age 70 for many baby boomers. 

Unpredictable and erratic stock market investments, combined with low interest rate bearing bonds, CD’s and treasuries are leading people to focus more on the predictability and higher returns offered by annuity and life insurance contracts.  The search for higher returns has made future retirees more vulnerable to risk as they try to move up the yield ladder.  The US Government itself, in recognizing the lack of available safe retirement income and the heighted risk with the under-funding of Social Security program obligations, has started focusing on the need for individuals to consider annuities.  Bi-partisan efforts have gained momentum in Congress regarding how to facilitate opening up markets to invite more individual participation in annuity contracts, both inside and outside traditional retirement vehicles. 

Most importantly when a client works with Intelligent Directions, will state clearly when a client’s needs are NOT going to be best served by annuities, life insurance or any other product in the market place that we might offer.  Call it integrity, call it honesty, but frankly it is simply us being “60-something” ourselves and being comfortable with our own financial plans.  Having been a management consultant for over 30 years, and as a former Deloitte Management Consultant, it is apparent to Mike that professional relationships last only if we are honest.  It is important to us that our clients have a positive opinion of us, and in our mind that is mandatory for a lasting network of business relationships…all of which is much more important to us than any given commission check.  If a client appears to already be well prepared for retirement, and the risks of retirement, we will clearly acknowledge that.

We will offer advice free of charge, and we will spend as much time as needed with our clients and their advisors to help them fully understand the options, and terms and conditions of any product contract.  Admittedly many of the annuity and life insurance products are complex, but that is because they are in fact “contracts” and not investment vehicles in the traditional sense (like mutual funds, or even hedge funds).  The fact that our clients will execute a strong binding contract with a large financially sound insurance company reflects the safety of annuities and select life insurance products.  These contracts are not something to fear.  We will explain each contract, and make sure that all questions are answered either by us or the insurance company offering the product.  We will offer education to our clients detailing the life Insurance company business model to increase personal knowledge and confidence, and why it is often prudent to place at least some money inside insurance company business structures.   Some of the more advanced topics that you might want to discuss with us:

  • Suggestions on how to fund early retirements and build bridges to your other retirement cash-flow streams for use beginning in the age 59 to 70 + time frame.
  • The pure concept of “longevity” insurance.
  • How annuities can offer high internally compounded tax-free growth, similar to common retirement accounts (IRA’s, 401Ks, etc.) … yet with no annual limitation on contribution limits. 
  • “Joint” Annuities and Life Insurance that cover both spouses.
  • What amounts are you budgeting for retirement, and the “unexpected?”
  • Medicare limits and Medicaid Spend Down Rules, including “look-back” periods of 3-5 years and how this can unexpectedly shorten your Retirement Preparation Runway.
  • What does “self-insuring” your long-term health care really mean?
  • How to balance your retirement cash-flow needs, with planning for your own long-term healthcare and money that you wish to pass to your heirs.
  • Solutions to potential Tax Burdens found in existing life and annuity products that you may hold.
  • How to provide additional Social Security-like cash flow for your children and grand-children (reduce their risk and reliance on Social Security and changes to tax treatment of retirement plans).  Who actually owns an IRA?

When investors approach retirement age, the runway gets very short…time quickly runs out to lock-in and capture guarantees for retirement cash-flow.  At age 60 it is more difficult to start trying to lock in higher rates of return.    If the stock market suddenly deals a 40-50% unexpected market loss to a retiree (or a soon to be retiree) it can be absolutely devastating (caution noted here: percentages used in financial advertising are often misleading.)  For example, to get back to “even” after suffering a 50% market loss, it won’t happen in 3 years with 15% average gains compounded (rare and unlikely anyway) …that only gets you half-way back to even.  Reality is that It could take you 10 straight years of a 10% return (or 7 to 8 years with true/smooth compounding) … and that would only work only if there isn’t another highly probable mild 5%-10% down year somewhere in that timeline, which could deal you another 2 to 4-year setback.  Again, this is just to get back to even.  Yes, it takes a 100% GAIN to get back to EVEN after a 50% LOSS, and that can take a decade or more.  Ouch.

Instead, imagine if you could eliminate the erratic movements of the market in exchange for cash flows that could grow at rates 1-4% higher than other safe available investments… and there would be zero downside risk of a negative return in bad times.  In a 15% up-market year for example, your “gain” might be capped at 8-12% contractually, but in a 15% down market year your worst return is contractually set at 0% (no loss).  There is a long explanation behind how this actually works, but suffice it to say that this exemplifies the absolute advantage that insurance companies have over money managers at Mutual Funds, Hedge Funds, ETF’s, Variable Contracts, etc.  Those managed funds by charter (and because of competition) are required to be continually invested in specific stocks/sectors, etc.  When the market is going to have a bad week, and everybody knows it, those managers must stay invested to a large extent.  Yikes!  Insurance Companies are free (within the guidelines of their heavily audited and regulated risk pools) to move in and out of the market, hedge some, own real estate, etc.  Their promise to you is an annual contractual rate of return, and that promise in this example is to match the contracted annual market rate of return.  This is a fairly easy obligation for insurance companies to meet, they are not required to stay in the market constantly, or to own a basket of stocks with your name on it.

There are many safe annuity contracts (and some hybrid life insurance products) which eliminate most downside market risk completely.  The retirement preparation runway can also become beneficially long with some of these products in the case of deferred annuities and certain specific tax-friendly life insurance options.  The earlier in life that an individual begins the process (some annuity products are written Age 0 to Age 80), the less initial investment it takes to meet future cash flow needs.  A one-time single annuity premium with a deferred withdrawal start date stretched out 10, 20, 30 years can yield phenomenal cash flow once the monthly withdrawals begin.  If younger clients were to start annuity and life contract “investing” in their twenties and thirties, in at least a small way, the advantages of tax-free compounding can be huge..

There is a reason that all highly rated insurance companies survived 2008-2009, and even survived and did well during the Great Depression.  These long-standing highly rated Insurance Companies have done far better than banks and brokerage houses in bad times.  They have a unique internal strength, and their business model has always allowed them to honor their contractual obligations to millions of individuals and families.  Once we help you understand the insurance company business model, you will see how these insurance companies actually survived and prospered in the 1930’s, as did their many wealthy individual annuity and policy holders.  More recently, annuity sales nationwide are up double digits, and this growth is expected to continue as people become more educated and aware.  IDC wants to be your trusted advisor.

Whether you choose to lock-in future cash-flow streams now or later, we feel that it is extremely important for you to at least fully understand your retirement enhancing options, and any associated risks to your current or planned approach.  The famous (often cited) story about Babe Ruth maintaining his wealth through the Great Depression by placing his funds in annuities with large financially sound life insurance companies is true.  He did just fine with annuities, while many of his peers were financially destroyed.

Within your life span, just think about the Savings and Loan Crisis in the mid ‘80s, the Flash Crash in 1987, the Dot-Com Bust, Lehman Brothers collapse, The Great Recession 2008-09., etc.  While we survived these tough episodes, they did inflect long-term damage to our financial plans …and if one of those type of events happened during or close to your retirement age, think about how vulnerable you are.  For example, just look at your Mutual Fund performance in Q4 of 2018 (Ouch!).   Even the so-called safe and well-managed “Target Funds” for near-term years such as “2020”, which are supposed to prepare you to retire next year, lost 4% to 9% in this 3-month period.  How safe it that?!   Moreover, what does a retiree do with the balance in their 2020 Target Fund next year to earn 2-12% returns going forward?  Can that retiree even find adequate guaranteed income, with no down years, for the rest of their life, while they are drawing down that balance?  What happens if they outlive the draw-down process?  Many annuity contracts have options where the payment streams continue for life (even if you live to be over 100), AND those payment streams can be contractually guaranteed to inflate each year!

Please feel free to call or e-mail Mike Johnson any time.  Whether he meets with you over the phone or in person, if all that you gain from that discussion is a better understanding of the financial value of insurance products, then we will have met our objective and we’ll call that meeting a “win”.  We won’t be making a play to manage your entire financial life, that is not our purpose.  We are committed to enhancing client retirement cash flow, and mitigating any risks to those cash flow streams.  Whether you are your own financial advisor, or you seek advice from a CFP/CPA on a regular basis, it would be beneficial for you to include us on your team.  Having worked with CPA’s his entire career, Mike is comfortable with and understands his team role, and would not be involved to compete with other professionals on your team.

“Keeping the Main Thing the Main Thing”

August 17, 2016

We started this topic (RFA vs RAD) with the observations that:

(1) Organizations, in their haste to deploy new or enhanced technology using rapid application development techniques, were taking significant risks that could be nearly eliminated by taking the time to develop and confirm requirements before coding; and

(2) Business process re-engineering sessions are a valuable way to flesh out requirements and maximize the return on investments in technology but that organizations are reluctant to use them because they take time and can lead to greater complexity and development costs. As one executive told me, “We don’t need staff input – we already know the best way to get the job done.”

I have to admit that the executive had a point. A few years ago, I walked into a conference room where a client had a group of staff members working on functional requirements. In their enthusiasm to flow chart a business process, they had covered the walls with flip chart paper and had filled virtually every sheet with “If” diamonds, connectors, and process blocks before getting deadlocked in heated debate. My heart sank. It wasn’t spaghetti code but it was certainly pretzel logic – there was no way to clearly identify the main path from the labyrinth of exception paths. We spent some time capturing the maze in Visio so that we could edit it, brought the team back in the next day and stepped them through each diagram. We stopped at each branch in the flow chart and asked the same questions:

(1) If we were starting from “scratch” would we do it this way?

(2) How often does this happen?

(3) How important is this functionality to meeting customer needs?

(4) Does this really need to be automated?

(5) Does this really need to be performed in different ways, or can a single process be adopted?

As you might expect, we began paring down the exception paths, and simplifying the process. By the end of the afternoon we had clearly defined the main path through the process and the most important branches. We had also identified several parts of the process that were presently manual and handled differently as well as some parts of the process that were solely related to limitations with their present information systems and could be readily eliminated. When we ran into debates about different ways to perform a part of the process, we backed them away from thinking about how they did it today and asked them to focus instead on how they would design the process if they were starting afresh. It wasn’t always easy, but the staff members got the hang of it quickly enough. As a result we were able to:

(1) Clearly define the automation boundary, including the functionality that was needed for the prototype and the functionality that could follow in later phases;

(2) Clearly define how the automated parts of the process would interface with the manual parts of the process (it is sometimes easier to empower employees to make decisions within specified bounds than it is to develop technology to handle every possible exception); and

(3) Eliminate a lot of complexity that added to cost without providing any real value.

Oh yeah, the staff members surprised all of us by becoming up with some insights and innovations that the executive team hadn’t thought about.

So, business process re-engineering sessions can be very useful. Just remember that the “main thing is keep the main thing the main thing.”

RFA (“Ready, Fire, Aim”) vs. RAD

December 15, 2015

We’ve all heard the old joke about “Ready, Fire, Aim” but for many execs in government and business that we speak with, and who are being pressed to quickly respond to mission-critical operational requirements or competitive pressures, it’s not so funny. “Agility” has become the standard by which the effectiveness of executives and organizations is measured. To be agile, you need to be nimble and fast, but to be agile AND effective you also need to be right. Too often though, in the race to be agile, the delivered systems miss the mark. Sometimes, if the miss is not far of the mark, you can quickly recover; but mostly we see a lot of scrambling to get a temporary fix in place to buy some time. For our first few posts in the Blog, I’d like to share some thoughts with you about steps that can be taken to ensure success while avoiding the pitfall of “paralysis by analysis.”

I’ve always felt that business process re-engineering (BPR) sessions provide an invaluable opportunity to ensure that you’re automating the right stuff and getting the most value from the technology investment; but many execs are wary of conducting BPR sessions as part of the IT development process. They fear, and rightly, that BPR sessions can take too much time and encourage the development and inclusion of requirements that add complexity, risk, and cost, without a lot of value. BPR just doesn’t seem to fit in with the concept of “agile.”

But it doesn’t need to be that way. You can get the benefits of BPR while being agile – in fact, BPR may actually be one of the best tools available to enable you to quickly focus on the most important requirements, to validate the system approach, manage risk, and ensure that the delivered system provides maximum impact. But you have to plan to make this happen. As the late Ozzie Davis wrote, “It’s not the rap; it’s the map,” and our map, and the subject of a series of blog posts over the next few blog entries, will include some thoughts on: a) getting stakeholder buy-in and commitment, b) re-structuring the review of your “As Is” business processes or technology environment to focus on high-value activities, c) developing a blueprint for your “To Be” environment in stages, and d) rethinking how we put together and execute a transition plan.

Welcome to IDC’s Blog

February 8, 2012

Welcome to IDC’s blog. Our objective is to use the Blog to provide fresh insights and thoughts into topics of interest to IT and business executives. We hope to provide some value in exchange for the time you’ve spent visiting our website. If you have any thoughts, suggestions, or comments, please use the “Contact” button on the home page to get them to us. Thanks for visiting us at

IDC Completes LA County Disposal Facility Tax Audit

May 1, 2011

IDC Completes LA County Disposal Facility Tax Audit

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