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.
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.”