Americans continue to warm to annuities, and the Hispanic community can be part of that warming if insurers grasp what is important to Hispanics. If advisors embrace the importance of family, they will be able to cut through a thicket of data and reach the heart of the Hispanic consumer, experts say.
Some facts about Hispanics and annuities:
o U.S. Census Bureau estimates that the Hispanic market in America is expected to grow to 47.8 million in 2010 from 35.6 million in 2000;
o Production doubled for all fixed annuity products in first quarter 2005 over first quarter 2004 for Hispanic clients of Allianz Life Insurance Company of America, according to the company;
o Data cited by McDonald Marketing, Dallas, from the book “Racial and Ethnic Diversity” by Cheryl Russell, finds that Hispanics are 52% under the average for owning life insurance products, including annuities.
The picture that emerges, experts say, is one that has great potential if coupled with education about annuities and how they fit into financial services.
Annuities are wanted and needed by the Hispanic community, says Vince Vitiello, senior vice president of strategic initiatives, Allianz Life, Minneapolis.
Index annuities, which offer a guarantee and an upside potential, are popular with Hispanic clients, he adds.
The reason, Vitiello says, is that “there are a lot of first-time risk takers.” They are not comfortable with fluctuations in the market and prefer annuity products with guarantees and death benefits, he adds.
For this reason, there is not as much interest in variable annuities as there is with the fixed annuity, he continues.
The sensibilities may also be different, Vitiello explains: recent immigrants don’t want to die poor, but the mainstream consumer is looking to die rich.
He says that recent immigrants need companies to take an additional marketing step, which is to start by explaining what an annuity is. This needs to be available with bilingual marketing materials, he notes.
However, “it is not just about product” but rather meeting needs, he says. “If you are just selling product, you are doomed to failure. There needs to be trust both of the product and the organization.”
It is also about partnering with the Hispanic community. For instance, he says that Allianz Life understands education is important to the Hispanic community and has created a high school program, the Hispanic Heritage Youth Awards.
Understanding the nature of Hispanic clients is very important, according to Luis Strohmeier, certified financial planner based in Dayton, Ohio, with Summit Financial Partners, a division of AXA.
“Most Hispanics are very conservative people. It is a cultural thing,” he says. This conservatism coupled with negative press on how variable annuities have been oversold has made the Hispanic market a little cautious about annuities, he continues.
Additionally, he says, annuities can be difficult for consumers to understand and for this reason, education is an integral part of providing annuities to Hispanics.
A lot of large companies are not doing a good job of educating the Hispanic community, he says. The reason, according to Strohmeier, is that there has not been enough effort to make a complex product understandable, particularly to those consumers who are Spanish speaking.
A “cultural disconnect” results when companies try to push a product to clients who do not understand it or who are not offered sufficient customer service, he says. It is the biggest mistake a company can make, Strohmeier adds.
Annuities with features such as death benefits and guarantees, he says, can be a “wonderful story to tell, but I’ve never had a case in which a Hispanic client has called and said ‘I want an annuity.’”
The conservative nature of the Hispanic consumer is attracted by features such as guaranteed minimum income benefits, Strohmeier says. “Guarantees give them peace of mind.”
But, they also come at a cost and that cost must be explained to the client, he adds. Hispanic clients “welcome those guarantees as long as they understand what they are buying.”
Within the Hispanic market, more mature clients prefer fixed annuities and younger clients are more interested in VAs but with guarantees, Strohmeier says.
But, he says, what the whole Hispanic market is really interested in is 1) protecting family; 2) educating family; and 3) retirement.
Annuities certainly can address the dynamics of the Hispanic community, says Juan Job, corporate vice president-marketing management with the agency department of New York Life Insurance Company, New York.
For instance, Job says that Hispanics, and particularly, Latinas, are part of a wave of entrepreneurship and annuities can help these new entrepreneurs plan for retirement.
And because Hispanics are so concerned about their families, annuities can ensure that family members do not outlive their money, Job continues.
Taking a consultative approach in which a producer looks at all the needs of a client is important when considering whether an annuity could be useful to that client, explains Jane Conti, vice president-cultural markets with New York Life’s agency department.
Index annuities are attractive to Hispanics because “there are a lot of first-time risk takers” among them who want guarantees and are leery of market fluctuations.