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Retirement Planning > Retirement Investing > Annuity Investing

Let's Go After New Annuity Dollars

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Morningstar Inc. reported that variable annuity net sales as a percentage of VA total sales was only 18.3% in 2007. In the 2008 Annuity Fact Book, NAVA points out that withdrawal and surrender activity and 1035 exchanges either do “not result in new dollars to the industry or drain dollars from the industry (withdrawals and surrenders).”

It’s my belief that too many of the dollars going to annuities last year came from the pockets of other insurance companies. While most of the exchanges were in the consumer’s best interests, I wonder if we are collectively strengthening our industry and our profession or weakening it.

Here are some questions to consider:

–Would our industry be stronger if insurers were not subject to so many exchanges, rollovers, and transfers each year?

–Could actuaries then design annuities with even more pro-consumer benefits if persistency improved?

–Wouldn’t compliance, FINRA, and state departments of insurance like knowing that fewer policyholders incurred surrender charges at the time of exchanges, rollovers or transfers?

–And, finally, would financial professionals be able to build stronger careers if we discovered better ways to find new non-annuity dollars from existing annuity owners instead of moving annuity dollars from one insurer to another?

2 important questions

Question #1: Are there enough dollars out there?

According to the Federal Reserve, the amount of money in Certificates of Deposit, Passbook Savings, and Money Market accounts owned by individuals is close to $5.9 trillion!

If 80% of the $255 billion in variable and fixed annuity sales in 2007 came from the pockets of other insurers, that means we got only $51 billion from the $5.9 trillion bank vault last year. In other words, the industry–embarrassingly–got less than one penny of every bank dollar in spite of us having tax-deferred growth, lifetime income, death benefit guarantees, and the advantage to having a surrender charge period.

Said differently, in spite of us being the only franchise in the financial world that can provide guaranteed income for life, we got less than 99% of the money.

So, yes, the money is there. And, if this article helps the industry get only 2 cents from every bank dollar, we have just helped some National Underwriter readers double their income. Far more importantly, we can help thousands of consumers potentially achieve the financial and emotional independence they want and deserve.

Question #2: How do the annuity owners feel about themselves at the point of sale?

Let’s assume that your clients and prospects have met 10 different insurance professionals since they purchased their annuity(ies). During those 10 meetings with the insurance professionals, what percentage of the time do you think your clients and prospects heard that they purchased “the wrong type” of annuity or “the old kind of annuity” or “an annuity with the wrong insurer”?

Do you think that your clients and prospects felt smart after hearing about their annuity shopping skills? Or, did they feel dumb, duped, or mad?

For a different approach, see the sample script in the box on this page.

This is the time to strengthen our industry and our profession by learning how to find new dollars from existing annuity owners. If we do, we will be well on our way to helping our clients achieve the financial and emotional independence they want and need.


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