Because placing annuities is not just a transaction, the producer needs to know the how-to’s. Here are 5 mistakes that new producers must avoid.

1. Selling tax deferral to someone before seeing their tax return.

First things first, don’t just assume that because someone lives in a nice house that they pay a large income tax. Retired people especially can have low expenses, generous Social Security, non-taxable disability benefits, or tax-free municipal bonds, just to start. They’re also proud Americans; they know the country costs money to run, money they’re happy to pay.

Before you start talking about annuities, ask the client: “Do you feel that you pay too much in taxes?” If the person says yes, ask, “Exactly how much did you pay last year in federal and state combined?” Most will not be able to tell you without pulling out these returns. When that happens, check their overall tax rate on their return. If it’s large, point it out to them. If it’s small, less than 10% total, then tax-deferral may be a “bad sale.” Perhaps move on to life insurance, long term care insurance, or wealth transfer issues.

You would be surprised how many times that question is answered with “we don’t pay a lot in income tax.”

2. Not asking when the client will need the money.

Many advisors, now that they have a client who is truly interested in tax deferral, don’t ask when the client will most likely spend the money. The client might say next year–or never.

If it’s next year, will the target plan limit the client to a 10% free withdrawal, even though the person will need 15% of the account value? Maybe the advisor could leave 20% in the bank and move the other 80% into an annuity. That will still go a long way toward solving the tax problem, and it will keep the advisor out of trouble.

If the client says, “I’m never going to touch the money,” perhaps life insurance or wealth transfer sales would be a more appropriate sale than an annuity.

3. Not asking the client about his or her beneficiaries.

If the annuity advisor is competing with a bank certificate of deposit, mutual funds, or other tax-causing assets, check the account’s beneficiary listing. Use a speaker phone in front of the client, and call the bank, brokerage house, or company. Ask, “If my client dies tomorrow, will this money go to someone automatically?” If the answer is no, then ask, “Well then, would it go to probate court?”

If the CD, mutual fund or other asset custodian says, “yes, it will go to XYZ, automatically,” then ask, “and after that person, who are the contingent beneficiaries?” This is an important point because annuity products have a lot of extra value in their nature in regard to this issue. If the client isn’t motivated enough to move money on a small rate difference or small tax savings, the extra added value of solving a no-beneficiary issue may be just enough of a push.

4. Not asking the client “why do you like the asset you have now?”

There is a reason why the client has what he or she has–that CD, mutual fund, stock, or whatever asset is something the client chose. So, ask why the client likes it. Relying on tax savings alone may seem like it should be enough, but it’s usually not.

Make sure to identify what the client does like about the current asset and make sure the annuity now being sold has a benefit or feature that will satisfy the client’s suitability as a good trade. For example, say the client says, “I like my CD because I can walk into the bank without calling or waiting on an insurance company and they’ll give me my money.” In that case, you could say, “I have an annuity with checkbook access. You can write a check and cash it at that same bank, the same way, on the same day. How would that be?”

5. Trying to sell “just one” company’s products.

The client today has media galore and lots of data sources throwing information on the table. With all those choices available, it is easy for a client to get analysis paralysis.

Don’t just try to sell one annuity to a client. Show a choice of several and bring up features and benefits unique to each. The answer may be to break up the sale to 2 or 3 companies or maybe to narrow down the benefits and features to the one that offers features that attract the client. But make sure to cover the subject of choice. Even captive agents should talk about the competition and how they first shopped for companies to work for, based on which one had the best products.

The client may not buy if he gets the feeling he should shop around first. But, if you explain that you shopped around for him and tell how you came to the conclusions about the product now being offered, it’s doubtful he will feel the need to do that job again.

Paul A. Dyer, CRFA, LUTCF, is CEO at Master Mentors LLC, an agents mentoring firm in Bangor, Maine. His e-mail address is .