Confronting client objections is a fundamental part of an advisor’s job description. But sometimes, to serve a client’s best interests, an advisor must go above and beyond the call of duty – and endure a bit of extra punishment – to defend a recommendation.

Such was the case recently for certified financial planner Rich Schuette, who ran a gauntlet of his own peers in order to support a variable annuity recommendation he made to a wealthy senior client. To satisfy the client that the $1.5 million VA investment he was recommending was indeed sound and suitable, Schuette, who’s an advisor with MJL Advisors in Santa Barbara, Calif., first had to solicit endorsements from other members of the client’s advisory team. That entailed meeting separately with the client’s estate planner, accountant and business manager.

Rather than wait to field the objections he knew would be forthcoming, Schuette chose a different tact. He opened each meeting by spelling out the objections he anticipated each member of the advisory team would have, then explained how specific features and benefits associated with the annuity outweighed the drawbacks. Using that approach, Schuette succeeded in convincing the three advisors that, in this case, a variable annuity truly was the best product for the client. Mission accomplished.

“Ultimately, treating the objections on the front end like I did prevented us from getting too caught up in issues that, in this case, weren’t relevant,” he explains. “You do your homework up front and put yourself in their shoes prior to them having to tell you what it’s like to walk in their shoes.”

Securing endorsements of his VA recommendation from the three advisors made Schuette’s meeting with the actual client a virtual nonevent. “By the time I got to that stage, it was a matter of [the client saying], ‘Where do I sign?’” he says.

Schuette’s situation demonstrates how an advisor’s anticipation, preparation and creativity, along with good old-fashioned determination and a steadfast commitment to always act in clients’ best interests, all come to bear in finding ways around objections that may stand between a client and product to which they are ideally suited. Since objections can come from unexpected angles at any time, the best you can do as an advisor is prepare yourself for the possibilities.

To that end, we’ve come up with strategies for overcoming a range of objections that advisors are likely to come across for a variety of products they recommend. Don’t say we didn’t warn you.

Variable annuities

Sticking point: Costs, costs and more costs.

The advisor’s objection buster: Granted, the initial and ongoing maintenance costs associated with variable annuities are large relative to other investment alternatives such as mutual funds. Here’s where the advisor must be quick to steer the conversation to the features that make variable annuities unique among investment products and worthwhile investments for many people, including seniors. Tax-advantaged growth is one for which many clients are willing to pay extra. Guaranteed income for a lifetime is another. An ability to demonstrate the unique versatility of the variable annuity is crucial.

“Things like tax deferral and accumulating assets on guaranteed basis, you just can’t get from other investments,” says David Hoffmann, CFP, an advisor with D.B. Root & Company in Pittsburgh, Pa. “Get them to understand those features and you’re in a good position to have your recommendation heeded.”

Sticking point: Risk, risk and more risk.

Objection buster: Variable annuities have been stigmatized as uniformly inappropriate for seniors because their fortunes are directly linked to the performance of equity markets. But that stigma took hold before insurance companies began rolling out guarantee features designed specifically to address concerns harbored by more conservative investors about loss of principle, evaporation of income and a disappearing death benefit.

Today a variable annuity can be tailored to address most any risk-related concern, with a wide array of riders that guarantee living and death benefits. From guaranteed minimum income benefits for those concerned about outliving an annuity’s income stream to enhanced guaranteed minimum death benefit riders that give beneficiaries a larger death benefit when the contract holder dies before annuitizing the contract, the options for overcoming the “too risky” objection have never been more plentiful.

“I recommend variable annuities to many of my more conservative clients, for whom any type of risk at all with that money is a real issue,” Hoffmann explains. “The thing I explain to them is that variable annuity companies have been forced to change over time and to offer more downside protection.”

Long term care insurance

Sticking point: Nobody in my family has ever needed long term care, so why spend all this money on something I probably won’t ever use?

Objection buster: Certified financial planner Jill D. Hollander, principal at Financial Connections Group in Berkeley, Calif., estimates that nine of 10 client objections she encounters are LTCI-related. Often those LTCI objections come from clients who haven’t experienced the wealth-draining impact of long term care firsthand. “If you’re talking to a numbers person,” she says, “show them the statistics documenting how they’re more likely to use their long-term care policy than they are to use their homeowners [insurance] policy.”

If that alone won’t sway them, detailed financial illustrations often do. “During the retirement planning process,” Hollander continues, “it’s important you show these people just how financially vulnerable they are, how quickly long term care can deplete their assets. Most of the time it’s going to blow whatever estate they have out of the water.”

Here’s where more numbers help build the advisor’s case, according to Ellen Fairbanks, CFP, CLU, an advisor with MD&A; Financial Management in Pittsburgh. “You have X amount of money now. Put a 3 percent inflation factor on it, show them their income stream and expenditures, and at some point they’re out of money. When they see that, there tends to be a moment of enlightenment. You don’t want to unsettle them but at the same time you want to appeal to the logic of the situation.”

If the situation involves a couple, Fairbanks suggests developing a scenario in which one person needs long term care. Here the advisor is appealing to people’s reluctance to burden to their spouses, partners and children. “They usually will see how that leaves their spouse or children in dire straits. That resonates with the wife because they’re usually the one who’s going to be left.”

Sticking point: LTCI is just too expensive. There’s no room in the budget for it.

Objection buster: Here’s where to emphasize than even a small measure of LTCI coverage is better than none at all. Flexibility in terms of coverage levels, features and duration, plus discounts for good health, allow policies to be tailored to more modest budgets. Sometimes it’s worth getting a client’s offspring involved in the affordability discussion. If they’re convinced of the need for the product, Hollander says, “they often are willing to help with the premium because in the long run, it’s in their best interests.”

Sticking point: All I hear about LTCI is that premiums are constantly increasing with little or no notice.

Objection buster: True, you concede, LTCI rate increases ambush some policyholders with frustrating regularity. But with shrewd comparison-shopping, a client may never have to endure a single one.

A few of the most highly rated LTCI providers have products with histories of no rate increases. Advisors like Hoffmann limit their shopping to policies offered by the best-rated companies with the longest track records in the LTCI business. “If we stick to the top-rated companies, we’re much less likely to have face rate increases down the road.”

Sticking point: Let’s table the LTCI discussion for a few years. I agree it’s probably something I need, but I can always buy a policy later.

Objection buster: When it comes to purchasing LTCI, Hoffmann emphasizes to his clients that there’s no better time than the present. “I tell them there are three reasons why buying it now makes sense. First, they’re likely not going to get any healthier than they are right now. Second, they’re certainly not going to be any younger than they are today. And third, insurance companies are raising rates to new policyholders; policies are getting more expensive all the time.”

Alternative/private placement investments

Sticking point: This kind of illiquid investment is way too risky for a senior investor.

Objection buster: These days, Schuette points out, even relatively conservative investors have recognized that alternative and private placement investments – oil and gas partnerships, venture capital investments, real estate trusts and the like – are important portfolio diversification and growth tools.

To clients who say they don’t know any other seniors with alternative investments, the advisor can point out that even state pension funds, typically conservative in their approach, now allocate significant assets to alternative investments. “It’s not for everyone,” he acknowledges. “But it’s a very viable and necessary asset class for the purpose of diversifying someone’s risk profile. It’s very suitable for the growth component of an affluent senior’s portfolio.”

Real estate

Sticking point: Real estate has been bid up. Investing in it now would leave us with an asset whose value has nowhere to go but down.

Objection buster: Here’s it’s important to help the client understand that for investment purposes, there are very important distinctions between commercial and residential real estate. “They have very different business cycles,” Schuette notes. “You need to make clear that REITs (real estate investment trusts) aren’t buying residential real estate, which has been bid up. They’re invested in commercial and rental properties for the most part.”

Another key point to make is that real estate investments such as REITs are solid income-generators because of their rental property holdings. Thus they can serve as a valuable inflation hedge as well, a benefit that appeal to seniors on a fixed income.

As with alternative investments, it’s also worth noting that pension funds are major commercial real estate investors, mainly because it provides asset class diversity within the portfolio. Diversity is crucial whether the portfolio is owned by an individual senior investor or a huge pension fund, Schuette says. “What happened in 2001 and 2002 when stocks were getting pummeled? Real estate investments were performing very well. You want asset classes that tend to behave differently. You want real estate in a portfolio for the same reason you want stocks and bonds and cash in there.”