The need to deliver a simple message and a simpler variable annuity product was a theme that threaded through the sessions of the annual meeting of the National Association for Variable Annuities.
A simple product reduces suitability problems, makes it easier for the advisor to understand, increases sales and reduces risk that features such as guarantees can create, said speakers here.
A consistent message is needed to reach consumers and consistently putting the customer first is also needed today, said John Kennedy, vice president and national sales director of the brokerage division at PLANCO, a unit of Hartford Life Insurance Company, Hartford, Conn.
“Brand is important and there is no question that we use it to our advantage,” said Kennedy of Hartfords trademark stag logo. For advisors, he said, brand can help eliminate one of the steps in the sales process.
But, he noted, success goes beyond brand recognition since “there are companies that do not have the best brand but still do a boatload of business.” Success, he said, is tied to offering products that serve the customer and not simply because they are currently popular items to offer in the market.
Making it simpler for the advisor to sell is evident in one of the top selling variable annuity products on the market, says Jeffrey Oster, a registered principal and branch manager with Raymond James Financial Services, San Francisco. The chassis of this product has not changed in the last 10 years, he said, making it easier for advisors to sell the product and note any feature changes. That understanding of the product has contributed to its long-term success, he added.
Companies should avoid taking the approach of Ill offer you a GMDB and raise you a GMWB, said David Zander, a principal of Achaean Financial, Fort Wayne, Ind. Rather, he continued, a company should deliver a message and product that sets the company apart. Referring to the law of the Yukon, Zander said, “If you are not the lead dog, the view is the same.”
Reaching the consumer with that unique product and message requires simplifying language, he said. For example, he said that annuitization is not a word, as indicated by red underscoring in Microsofts Word program. Simpler terms have to be created, he added.
That need for simplicity was reiterated by Mark Tully, a senior vice president-annuity distribution and sales with The Phoenix Cos., Hartford, Conn. As an example, Tully said every company calls benefits by different names and that lack of uniformity makes it more difficult for advisors.
The need for simplicity goes beyond terminology and has to be reflected in product simplicity and presentation, he said.
If there are a variety of riders that advisors can offer, then there needs to be a strong educational effort about when those riders should be used, he said.
The complexity of product features is a concern in the home office because of the risk of suitability issues that could arise, according to Richard Randa, managing director, director of retirement planning services, annuities and IRA marketing with Wachovia Securities, Charlotte, N.C.
To address the suitability of variable annuities and guarantees embedded in them, Wachovia has developed an annuity suitability questionnaire that creates a system that flags both managers and the home office if there is the potential for a suitability problem associated with a VA sale, he explained.
The survey covers potential market timing problems as well as frequent 1035 exchanges within a 5-year period, Randa said.
One reason the questionnaire was created, he added, is that products have become very complicated. In fact, they have become complicated enough for his company to begin centralizing a review of sales in the home office, Randa told attendees. The review looks at items such as a clients age, risk tolerance and the need for money now and in the future, he continued.
The issue of 1035 exchanges can be addressed, at least in part, Randa said, by making products flexible enough so that a client can change a feature in a contract rather than having to direct an advisor to initiate an exchange.
Reproduced from National Underwriter Edition, October 7, 2004. Copyright 2004 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.