Like a chess player who’s always thinking several moves ahead or a boxer who’s ready with a one-two punch combination, savvy advisors know it pays to be alert to suitable cross-selling opportunities involving annuities.
The process starts with asking clients the right questions. Bryan C. Bradford, principal of HBW Insurance & Financial Services, Brighton, Mich, says, “Be an investigative reporter. Find out if the client has money sitting in something like a low-yielding fixed annuity or CD, where it’s not doing much,” explains William E. Kauffman, Jr., CLU, ChFC, LLIF, director of marketing for life and annuities at Senior Market Sales in Omaha, Neb. “Then you ask one really important question: ‘What is the purpose of the money in that account?’ That gets the wheels turning and opens up a lot of cross-selling opportunities.”
Done properly, the question-and-answer, fact-finding process should yield cues or red flags that signal a cross-selling opportunity, Bradford explains. The presence of a low-interest-rate account whose contents are earmarked for a purpose, such as wealth transfer, is one such cue.
Though the sale should always be secondary to the solution, cross-selling often leads to a win-win for client and advisor alike. So when opportunities like those detailed below arise, be ready to pounce.
1. Annuity with long-term care insurance. Annuities often need a complement in the form of a wealth-preservation vehicle. A person has a better than one-in-two chance of needing some form of LTC during his or lifetime, points out Pat Sheridan, Kaufman’s colleague and director of life sales at SMS. And the cost of care “can ruin just about anybody.”
Thus, it’s wise to position LTCI as “a way to hedge against that particular loss,” Bradford says. A person over the age of 70.5 with significant funds from an IRA that must be distributed might use some of those funds to pay for a stand-alone LTCI policy.
2. Annuity with an LTC feature/rider. Certain clients might be open to investing in an LTC rider or add-on as an alternative to stand-alone LTCI. By definition, this isn’t a pure, two-product cross-sale, Donohoe notes. But this new breed of hybrid annuity contracts with an LTC component (in the form of an LTC-specific income rider, for example) gives advisors another option to offer clients to cover at least a portion of LTC risk.
“You pay extra for the rider, but if I have a client who needs long term care insurance and isn’t interested in buying [a stand-alone policy], here’s a way for me to get them some level of coverage.”