While FIAs may indeed be an easier sell today because they cater to investors’ increasing preference for vehicles that offer a combination of downside protection and upside potential, advisors who go the extra mile ultimately will be better positioned to take full advantage of that investor mindset to boost their FIA sales. Industry observers say 2010 could be another record-breaking sales year for fixed index annuities. With that in mind, here are a few ahead-of-the-curve measures the experts recommend taking to make the most of the positive sales environment for FIAs.
1. Stay on top of product and feature development. “You have to make sure you educate yourself on the newest innovations with these products, so you can talk with clients about the most competitive products with the best features and lowest costs,” explains William Kauffman, Jr., CLU, ChFC, LLIF and director of marketing for life and annuities at Senior Market Sales in Omaha, Neb.
Staying abreast of product developments can be particularly challenging for independent advisors, he notes. That’s where membership in advisor-oriented industry associations such as FPA (Financial Planners Association) and NAIFA (National Association of Insurance and Financial Advisors) can prove valuable.
2. Focus on simple products. The more modifiers a product has, the more it tends to confuse investors, which often complicates the sale. “I tend to stick with the annuities that have the fewest moving parts,” says Anil Vazirani, president of Secured Financial Solutions in Scottsdale, Ariz., “because it seems like the more moving parts, the more the consumer loses out somewhere.”
Thankfully for advisors and investors alike, the trend in FIAs appears to be toward simpler products. Some fixed index contracts, such as one from American Equity, now offer a 5 percent guaranteed income rider as part of the base contract instead of as an option, for example. Others, such as the Balanced Allocation Annuity from Annexus Group (see the sidebar), have structures that take modifiers such as participation rate, averaging and caps out of the equation, notes Kauffman.
3. Know your carriers. To best serve clients, it behooves advisors to be well versed in FIA products from a range of carriers. Carrier ratings are important in evaluating whose products to offer to clients, as are recent carrier track records in the FIA market. Kauffman notes that in 2009, some FIA manufacturers lacked adequate capital to underpin their FIA products during a period of surging sales, forcing them to take steps to temporarily curb sales until they could replenish capital reserves. That situation has since been largely resolved, he says, and carriers “are getting back in the game, trying to drive business again.” That bodes well for the investor.
4. Build your knowledge and your credentials. “Getting my Series 65 [securities] license is the reason why my [FIA] production doubled from 2008 to 2009,” gushes Vazirani. “Having that license opens up a whole new world for you as an advisor. It puts you in the position of being a fiduciary, and I think because of that, clients look a you in a more favorable light.”
5. Stress seminars. Done the right way, no forum is better for showcasing an advisor’s knowledge to an audience of prospects. Some advisors favor a multifaceted seminar that educates and informs attendees on a range of engaging subjects. For example, an advisor might place FIAs in the context of a broader discussion of investment strategies encouraging growth with minimal risk.
6. Know your market and your prospects. As an advisor, you want products that match a client’s risk profile. On one end of the risk spectrum are investors who favor an investment vehicle that offers full equity-market participation, such as is found with a variable annuity. On the other end are those who prefer the ultimate safety of a traditional guaranteed-rate fixed annuity. FIA investors fall somewhere in between the two, says Kauffman. “Having that inherent guarantee of principal, along with the upside potential, is what makes indexed annuities so popular.”
Those features resonate with investors today. But it’s up to the advisor to make sure that resonance translates into actual FIA sales.
The new FIA
Daily monitoring capability with few moving parts
For advisors looking to ride the fixed index annuity cutting edge, check out Annexus Group’s new Balanced Allocation Annuity, a product that provides contract-holders access to annuity contract values on a daily basis. “They have really raised the bar with this type of indexed annuity product,” says Bill Kauffman of Senior Market Sales, one of 13 independent marketing organizations hand-picked by Arizona-based Annexus Group to distribute the BAA and its predecessor, the BPASelect. Those two products are unique enough in their design that Annexus Group has secured five patents for them, with five more patents pending, the company claims.
Investors are likely to find the daily tracking capability particularly appealing, Kauffman says. “Most carriers [who offer fixed index annuities] cannot tell you on any given day what your [FIA's] cash accumulation is.” Besides its unique daily tracking capabilities, the BAA’s two-year reset feature also is unique in the FIA market, Kauffman says. “It allows a person to lock in gains literally one month after they started with the contract. That’s unheard of. Nobody does that.”
Another part of the BAA’s appeal, he says, is its lack of moving parts. There are no caps and no averaging. One-hundred percent participation in a balanced allocation strategy is standard. Such simplicity makes the product easier for investors to understand and thus, easier for advisors to sell, he says.
Other selling points, according to Kauffman, are an 8 percent premium bonus and an 8 percent “Income Advantage” rider. The BAA, he claims, is also the only FIA currently available with a guaranteed minimum death benefit rider–the 4 percent guaranteed “family endowment rider,” which is designed for investors with wealth transfer in mind. The BAA is available for sale in 32 states.
Get more: Read NAFA executive director Kim O’Brien’s piece “Separate and equal: A fixed annuity solution” to get more insight on the fixed annuity marketplace.