Want to sell more variable annuities, keep clients happy and avoid problems with regulators? It is easier than one might think.
Following is a 10-point system that’s great for presenting VAs (and also for working with any investment). The goal is to get a clear picture of what the client really wants to do with his or her money, offer some choices, let the client make the choice and then do what every attorney loves to see advisors do: document, document, document!
1. Get into the head of the investor. I am not the marketing genius and neither are you. The only marketing genius is the client. The advisor’s job is to find out what the client wants and then give it to the client.
To do this, try using a checklist of about 15 questions. Table 1 shows a few key sample questions. Make this list into a quick, one-page document you can use in conjunction with other sales literature. And be sure it goes through compliance department approval before using it with a client. Next, when going through the list with a client, be sure to jot down all the client’s answers.
It is important to tell clients there are no right or wrong answers to the questions. You are just trying to understand what the client would most like to accomplish with these funds so you can make some good recommendations to consider.
Take this worksheet and initial it and date it. Ask the client to initial and date it, too. Give the client a copy and place a copy in your files.
2. Score the benefits. The checklist helps identify what clients really want. Now, take out a yellow pad and create a chart that lists the benefits that appeal to the client along the left column and then write down possible investment choices across the top. Turn the yellow pad around and have the client take notes and make the appropriate marks in the boxes as you go through and explain the options. In each box, have the client enter 1 point for a “yes” and a half-point for a “depends” or “maybe.”
The completed chart might look something like that in Table 2.
Once the client totals up the columns, you might say: “So it looks like the benefits of a VA come closest to fitting your needs. Would you agree?”
Have no prejudice here. If mutual funds, CDs or municipal bonds come up with a higher score–no problem–that is what you should recommend.
Once again, both of you should initial the yellow pad. Then, give the client a copy and keep another one for your own file.
3. Explain the costs of the investment. Many advisors assume the client wants the lowest cost investment. This is not true. Most clients are willing to spend a little more for an investment that closely fits their wish list. Show the client the costs of the preferred investment and then ask: “Are you willing to pay x-dollars to address these issues you told me were most important to you?”
If you have a chart on the expenses of the investment, have the client initial, make a copy and put it in your files.
4. Carefully explain what is, and what is not, guaranteed. Make notes in your file on what you explained.
5. Tell clients the truth–all the truth. That means you don’t know what performance will be and you have no idea which investment will perform better over time. In addition, always tell a client anything that could go wrong. Make notes in your file.
6. Describe the contingent deferred sales charge, if there is one. Make a note in your file.
7. Explain that there are no additional tax benefits to gain from placing a VA in a qualified plan. Make a big note in your file–this is a hot button with regulators.
8. Educate clients about the truth about VAs. They may have been listening to financial gurus on television or may have received a lot of bad advice from friends, family and the media. You need to prepare clients in advance about what they are going to hear and what the truth is.
9. After the sale, send a follow-up letter outlining the information above. Space doesn’t allow me to reproduce it here.
10. Never, ever, sell clients something they don’t need.
That’s it: 10 steps that can save your career and do great things for clients at the same time.
All in all, you should have 8 different notes or documents in your file stating why this investment is suitable and appropriate at this time. More important, you have only made recommendations that are in the client’s best interest, and you let the client–the marketing genius–make the investment decision.