What Producers Can Do In A Less-Than-Robust Market For Annuities
Start burning the incense and praying. Grab the divining sticks and start the rain chant. Grab your lucky rabbits foot with the four-leaf clover necklace. In words that could have been uttered by the great basketball coach and announcer Dick Vitelle, “Its ugly out there, baby. The markets are rocking our annuity boat and we have to get back in the game”!
So this month, Im dedicating this column to what you can do in less-than-robust markets. Okay, lets be candidwhat to do in a downright bad market. Actually, theres a lot you can do, but you need to be an effective communicator, a good teacher, and a patient producer.
Logically, the annuity and mutual fund businesses should not be as soft as they are in these trying times. In a recession, people should be saving, not spending. Granted, there may less money to go around, but at these times, folks are focused on making sure that the investments they make are well suited to their needs.
In this assessment of both the clients cash flow and investment strategy, lets not forget that annuities are clearly a savings tool–even more so, one with a long-term, tax-deferred investment strategy. Granted, its difficult for people at a gut level to look at investing as something other than saving, but it is. Additionally, no one likes to invest and see his or her investment value go down.
That said, however, your annuity business should be good, actually much better than your mutual fund business, since you can offer both secure rates of return(s) based on the performance of the market, or a combination of the two.
Following the news on a regular basis these days, you can sense an overall flavor of investment restraint in the hearts of consumers. As a producer, it is incumbent upon you to make a point of touching each and every client that you have and engage them in a review to determine the current appropriateness of their investments.
This type of investment check-up is actually much easier to do when the markets are frothy, since the air of uncertainty leaves consumers seeking advice from someone, dare I say anyone, who has the answers. As you engage in this assessment, you have the opportunity to reposition any inefficient assets that the client or prospect might have.
From an annuity sales perspective, you might ask several questions to identify assets better directed to an annuity. For example, after you ensure that the client has sufficient emergency funds, and has maximized his contributions to qualified plans, you can begin to look at other assets the client has which might be better positioned into the annuity contract.
The past nine months have actually painted a perfect backdrop for the annuity contract. Lest we forget, there are a variety of flavors of annuities, including fixed interest rate, equity-based interest rate and variable rate. You can purchase these to accumulate assets, generate income, or some combination of both. Aside from the obvious advantage of tax-deferred growth and tax-preferred income, there are a number of more subtle reasons to consider the annuity, both tax- and non-tax-related.