On Tuesday, the 6,000-plus attendees at the 2010 Million Dollar Round Table Annual Meeting, being held here June 13-17, heard from 8 speakers during the morning main platform session. The following are highlights.
What differences distinguish Baby Boomers from Generation Xers and the Millennials? How might these differences impact the producer’s relationship with the different age groups? What tips can help advisors win their business?
Cam Marston, an author, speaker and expert on the generational divide, offered his perspective on these questions. A key theme of the presentation was that the characteristics and motivating factors of the generations he studies–boomers, Xers and Millennials–require different approaches because of the varying ways the three groups receive messages on an emotional level.
“People’s decisions tend to be 85% emotional and 15% logical,” said Marston. “Clicking with your clients–rapport-building–is an emotional thing and requires an understanding of generational differences. You need to establish this emotional connection so that you can earn the right to win their business.”
One difference among the three generations, said Marston, is the extent to which they identify with others. In general, boomers tend be more group-oriented than younger generations. They also are more competitive, more likely define themselves by their work and are “very busy.”
Thus to connect with boomer prospects, he said, advisors should look for ways to save them time. That does not necessarily entail using the latest technology: Marston cautioned that many boomers remain averse to using new methods of communication, such as e-mail and online social networks.
In contrast with earlier generations, boomers also tend to see themselves as forever young, clinging to the pastimes of their formative years. This youthful spirit has been recognized by companies targeting boomers, noted Marston, who cited an ad by motorcycle manufacturer Harley-Davidson as an example.
For older boomers, the company has developed a motorbike featuring three wheels (like a tricycle) and a wide seat.
Generation Xers, said Marston, are more likely than boomers to question authority figures and be skeptical of vendor claims. But prospecting to them is usually worth the effort because, he noted, they are the most loyal of the three generations.
How to win an Xer’s business? Marston suggested that advisors thoroughly detail their services and product biases based on their expertise, but then elicit the prospect’s views on recommendations.
“Give them the decision-making ability,” said Marston. “Also, emphasize short-term solutions and near-term goals,” he added. “That will help you to build trust and credibility with them.”
As Xers also tend to trust most the views of their peers, advisors also would do well, he added, to secure testimonials and referrals from others within their age group. To that end, Facebook and other social media networks are useful tools.
As a group, observed Marston, the Millennials are “optimists,” in part because their parents have so well cared for them. They’re more group-oriented than Xers, traveling in “herds and packs.”
Seekers of instant gratification, Millennials are also coping with stress earlier in life than did prior generations. As a result, said Marston, they suffer from a new condition that sets in between adolescence and adulthood: “adultolescence.”
To help build rapport with Millennials, he said, producers should recognize their individuality and propose short-term solutions that can have an immediate impact. Advisors should also teach them about how to make smart purchases.
The Benefits of Mortality Credits
If there’s one concept absolutely not to overlook when talking about life income annuity features with a prospect, it is the product’s mortality credits–i.e., the reallocation of contributions of those who die to those who survive.
That was a key message of Tom Hegna, a chartered financial consultant and vice president of New York Life, New York, during Tuesday’s main platform session.
“The reason you buy a lifetime income annuity is to get paid mortality credits–and all lifetime income annuities offer them,” he said. “The older you are, and the longer you live, the more mortality credits you get paid.”
Hegna related a hypothetical scenario involving five women, each 90 years old, who agreed to share evenly, in each of 5 successive years, $500 placed in a box for their benefit. In the second year, one of the 5 women dies, leaving the remaining 4 with $125, a 25% gain over their original allotment.
In the 3rd year, a second dies, increasing the total $167 each, a 67% return. With each additional death in subsequent years, the amount apportioned to surviving women increases in like fashion.
Likewise, Hegna observed, annuity providers can offer progressively higher interest rates on their products as clients age. The example he used showed individuals age 65, 75 and 85 receiving payouts of 7%, 9% and 14%, respectively. They can do this precisely because of these mortality credits, a feature not available on alternate financial products.
How much of the client’s money should go into a lifetime income annuity? The “mathematically and scientifically correct” answer, said Hegna, is an amount that will at least cover basic expenses.
But he also noted that clients cannot optimize retirement income using the balance of their investable assets without rounding out the portfolio (including bonds, cash and various classes of mutual funds) with a second lifetime income annuity.