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July 19, 2009 at 08:00 PM
The senior marketplace is struggling in this economic downturn. 
Current investment yields are low, forcing seniors to invest in low-yielding accounts. If a retirement plan assumed the assets would grow at 5%-6% (a very reasonable assumption a few years ago), many seniors, after taking substantial losses, are feeling lucky just to break even.
Times like these point up that some of what was “sold” to seniors doesn’t really work for them.
Seniors generally have three main goals for their insurance–accumulating assets, distributing assets as income and efficiently transferring assets to heirs. The problem is, most products are singularly focused; and customers don’t think in terms of accumulation, distribution and wealth transfer. Many times a product is sold on the “sizzle” without real regard for the customer’s goal. For example, an annuity may be a tremendous accumulation vehicle–and an easier sale for a producer to make–but it may be weak for efficient wealth transfer. There’s a better way.
Accumulation. How best to accumulate assets on a tax-favored basis? Certainly annuities work well. For seniors, the fixed, multi-year guarantee or consumer-friendly fixed indexed annuities give upside potential while eliminating or limiting downside loss. That’s key because reducing risk is of utmost concern today.
Fixed annuities continue to sell well, especially when average 5-year bank certificate of deposit rates are just above 3%. Sure, gone are the days of the 5% multi-year guarantee rates, but annuities just can’t be ignored.
Some annuities are not only very consumer-friendly but also unique and quite easy for a customer to understand.
Consider: A client is playing blackjack with the usual rules–if the client beats the dealer the client wins; if it’s a tie (push), the client receives the bet back; and if the client loses to the dealer, the client loses the bet. Is this game really customer-friendly? How long will the client play?
What if the rules were changed so the client wins not only when beating the dealer but also if tied (pushed)? If the dealer wins, what if the dealer gives back the bet and invites the client to play again? How long would the customer play the game now?
