We’re hearing and reading a lot these days about the annuity market and how 2011 sales were a big improvement over 2010. We’re also hearing a lot about how annuities seem almost perfectly designed for today’s economic environment, especially in a society full of people who are living longer and growing concerned about outliving their savings.
In this roundtable, we look beyond the statistics and talk to the top producers who are generating those numbers.
To get the producer’s perspective on today’s annuity trends and how to capitalize on them, we turned to the following panel of top producers for their viewpoints: Ryan Pinney, Alan Schuh, and Kirk Wilkerson.
- Ryan Pinney serves as the vice president of brokerage sales for Pinney Insurance Center, a national brokerage general agency that provides insurance, investment and financial planning advice combined with proprietary tools to assist agents and financial advisors. Ryan is a three-time MDRT Top of the Table qualifier. He currently serves as the local president of NAIFA Northern California, as a member of the MDRT Member Communications Committee and as a member of NAIFA California’s Social Media Task Force.
- Alan Schuh of Alan Schuh & Associates LLC, in Weston, Fla., has been helping individuals and business owners preserve their assets, increase their income and reduce income taxes for more than 23 years. As host of Safe Money Radio, he helps people protect their retirement money. His firm’s mission is to teach clients safe-money strategies, with a focus on IRA/401(k) rollovers, retirement/income planning and capital transfer strategies.
- Kirk Wilkerson of Forest City, N.C., is a registered representative and investment advisor representative who offers securities and investment advisory services through AXA Advisors LLC. Kirk is a nine-year Million Dollar Round Table member with six Court of the Table and one Top of the Table distinctions. His practice is dedicated to helping individuals and businesses build their financial futures.
Last week, the panel predicted even higher sales of annuities in 2012 and discussed variable annuities. This week, they look at indexed annuities and why guarantees are so popular.
Indexed annuities: A worthwhile product?
Charles Hirsch: A discussion of variable annuities always brings to mind indexed annuities. What are your thoughts on indexed annuity products? Can you talk a bit about where you see the best opportunities for indexed annuities, and what kinds of prospects typically benefit most from them?
Kirk Wilkerson: Equity indexed annuities have been plagued by controversy, and we don’t offer them to our clients. There are a number of differences between EIAs and VAs, including features, limitations and fees, as well as how the products are regulated and the licensing requirements of those who sell them.
VAs are securities governed by the SEC and sold by prospectus. The individuals who sell them must hold certain registrations from the Financial Industry Regulatory Authority (FINRA). We have chosen not to use EIAs because of these differences. We think we can achieve the same goals and protections for our clients by educating them about other choices they have. It’s the client’s money; they should know exactly how a product works and is regulated. Transparency is the key.
Ryan Pinney: I like indexed products and see a lot of potential for them when they fit. Indexed products will be used extensively with clients in their late 50s all the way into their early and mid-80s.The indexed marketplace is very diverse, and different products allow for a wide range of uses, from 401(k) alternatives to creating a guaranteed future income stream. The goal with indexed products, or any annuity for that matter, is to ensure you fully understand the client’s financial objectives. Suitability has become a major focus in the annuity industry and for good reason. Advisors who sell without the proper understanding of product features, surrender changes and rider fees can do a lot of damage.
Alan Schuh: Index annuities account for about 90 percent of my annual revenue and have been since they became available for sale in 1995. For the risk-averse client, FIAs nicely round out a well-diversified portfolio. The prime age group for index annuities with lifetime income riders seems to be about 10 years prior to their desired retirement age. When clients are given an opportunity to double their account balances for income purposes, without subjecting themselves to market risk, they become hopeful that we can help them make up for the fact that they realize they haven’t accumulated enough savings to maintain the lifestyle in retirement.
Guarantees serve as major selling point
Hirsch: Many annuity producers and marketers believe that it’s the guarantees offered by annuities that are driving the surge in annuity sales right now. For you and your own sales efforts, do you find that to be the case? If so, how do you help your prospects understand what these guarantees mean to them? If the guarantees are not a focus for you, can you share what is?
Pinney: The guarantees are definitely part of it, but I think those who only promote the guarantees miss out on a lot of additional features annuities have that can benefit their clients. Living benefits and long-term care riders are the newest additions that need to be fully understood and thoroughly discussed with clients and prospects. Additionally, the low fee structure for these riders needs to be weighed, especially when comparing variable products or other investment options. Finally, the flexibility annuities can offer is a huge and often overlooked discussion point.
I personally like to ladder or stack products with various benefits and interest or surrender periods to maximize my client’s options. For example, one VA with no riders and a long-term growth strategy to keep fees down and maximize growth, a second indexed product with an income rider to minimize volatility, and a third indexed annuity with a long-term care and death benefit option. Implementing something like this allows the various accounts to be maximized and used only when appropriate. It also lets the client have access to more of his or her total account value, without penalty, through penalty-free withdrawals.
Schuh: I believe that the guarantees offered by annuities are the only reason I recommend them, and the principal reason clients purchase them. The differentiating factor between life insurance agents and stockbrokers is the guarantees of no market losses and lifetime income without annuitization. Many clients are disappointed at the results of their equity investments for the last decade plus and are very concerned about the safety of their assets in the future. Most people I meet have lost money in the last 10 years in both their investments and their real estate holdings. What we offer in terms of guarantees and peace of mind is priceless.
Helping clients understand the benefits to placing some of their assets in fixed annuities is relatively easy if you are passionate about helping people secure their financial futures. Also, you should own what you are selling; your conviction will come through in your sales presentations.
Wilkerson: Guarantees are, in my opinion and experience, a significant draw to VAs. With unemployment numbers where they are and with traditional pensions benefits continuing to decline, having the ability to guarantee a stream of income is important to clients. Of course, any guarantee is only as strong as the company backing those guarantees. Therefore, we have chosen to only work with companies we feel are strong enough to weather current and future volatility and economic instability storms ahead. Producers need to take the time to look at a company’s balance sheet and liquidity ratios because that indicates the strength behind those guarantees. Being a former educator, I strive very hard to make sure my clients completely understand all the ins and outs and cost of their products. It’s their money, they deserve to know. I want them to know as much as I do about these products and how to make the products work for them.
Next week, the panel predicts what’s ahead for the annuity industry in terms of innovations and opportunities.