People seldom look for financial products. What they want is not another product, but a solution to meet a need.
In fact, a study of the high-income market done by our company shows that even America’s most successful professionals lack knowledge about annuities and other key products but desire solutions for managing income in retirement and estate planning.
Investment professionals sell these solutions, which come when product and advice are packaged together to help clients better achieve their personal financial goals. That includes the packaging of riders, too.
Lets see how this approach plays out in the marketplace.
Financial services products, particularly annuities, increasingly face the danger of becoming commodities within the market.
But innovative product providers are finding ways to help investment professionals better serve their clients’ needs. If that didn’t already make good business sense, the Securities and Exchange Commission also has made clear in recent months that providing annuities is really about helping clients make the best investment and savings choices, not just selling a product.
Flexible product design helps investment professionals in this by ensuring that their clients can choose and pay only for the options that work best for them.
Take variable annuities, for example. They provide this flexibility through riders. In the past, annuities were designed with mostly static features that could not be altered. Whether you needed, used or planned to use a specific feature had no bearing on whether or not you would pay for that feature.
The modular approach to annuities, which emerged only in the last few years, is different. It supports investment professionals in needs-based selling. Essentially, it does this by allowing investment professionals to build VAs specifically for their clients within one product.
The investment professional can literally move from a base model to a deluxe model, depending on how much added protection a client needs or wants. The riders the professional uses might include enhanced death benefits, bonus payments, or protection of the initial investment for heirs.
Some clients might find the vast multitude of choices difficult to understand. But that is not an insoluble problem. The product provider can offer a “packaged riders” approach to the sale, making the presentation easier for both the professional and the client.
A packaged approach means the riders are packaged into solution sets. Marketing materials reflect these choices, simplifying the explanation process for the producer and making it much easier for producers to fit the product to the needs of a ‘typical’ client.
For example, a basic annuity without riders might be offered to those who are concerned about fees. In contrast, a client who is concerned about market declines might opt for a protection package with an enhanced death benefit and a minimum initial investment guarantee to protect the value of the account at the time of death, regardless of market conditions.
A packaged riders sales approach arms investment professionals with materials and tools that support them in asking the right questions and in helping clients customize their annuities. It links life needs or concerns with the rider or riders that will best meet those needs, such as value, protection, start-up savings or access to cash.
As people continue to look to their investment professionals to meet their individual financial needs, from retirement savings to estate planning, the financial services industry is changing the way it supports investment professionals. A packaged rider sales approach is just one such way.
is vice president-individual markets for Nationwide Financial in Columbus, Ohio. Her e-mail is email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.