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The Ideal Annuity Buyer

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When you think about prospecting for individuals who are most likely to have a situation where an annuity would be the best solution for them think in terms of three issues:

  1. They have a definable need(s).
  2. They realize or recognize the problem.
  3. They have the financial recourses necessary to make a buying decision.

Then look for prospects who have one or more of these dominant buying motives:

  • Life income. Individuals who may have lump-sum distributions, inheritances, legal settlements or they are looking for life income from some form of savings are good candidates. For example, split annuities where one annuity provides the required income and the other is deferred for a period of time in order to build a reserve or a fixed set of funds so future choices will be available.
  • Concerned about safety. Most individuals who have money in some form of an investment have experienced some type of loss of principal the past few years. While moving all their money into an annuity might not be the right move for them over the long term an appropriate question to ask may be, “Of the money you have left, how much do you not want to have at risk anymore so you can feel more confident about the money you want to have at risk in the market?”
  • Tax deductiblity. Individuals who have qualified plans or have not started a qualified plan, such as an IRA, TSA, SEP, etc., should be sought out as prospects
  • Tax deferral. Seek out CD owners, individuals who have had some gain in the market yet with taxes did not realize a gain, and people who want Uncle Sam to assist in building their “nest-egg” through tax deferral. Or individuals who would rather earn a gain on the taxes they would pay on earnings from other, non-deferred assets.
  • Conservative, want guarantees. Moving all of a prospect’s money into an annuity may not be in their best interest. However, moving the money they want to protect from potential loss with some guarantee of return, with an opportunity to earn a return and the prospect of paying taxes on this return at a later date, is a good strategy.
  • Savers. A SPDA (single premium deferred annuity) may be best for individuals who want to set aside a set amount for a future need that is known or who want the option to save with tax advantages.
  • Peace of mind. Individuals who want to reduce the stress and concern often associated with investments, bonds, variable products or real estate. Those who may want to diversify their funds so they can enjoy the next phase of their life with less concern about future income not being there when they need it.
  • Wealth transfer. Individuals whose retirement needs have been well planned out and now they want to ensure their heirs are taken care of by repositioning a portion of their liquid assets into a SPIA and using the income to fund a life insurance policy to ensure their heirs receive a substantial inheritance, tax free, and want to do this outside of probate.

So when you prospect, don’t only look for individuals interested in buying an annuity. Rather, seek out individuals whose dominant buying motive is best solved with an annuity. For example, ask them, What are the odds of living too long? It could be expensive, not just considering food, housing and ordinary maintenance; but inflation and extraordinary expenses, such as a health-care crisis.

These life events are not only predictable but need a solution in place prior to their happening. Our job as highly trained, licensed professionals is to help our prospects understand these potential risks. We do this through counseling, planning and motivation in our meeting with our prospects. Sometimes prospects object to the term “annuity” because of things they heard or read in the news. Our job is to review issues such as tax deferral and other concerns we have identified in this article and then help them build a solution they feel will best meet their needs. Often that will be an annuity.