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Retirement Planning > Retirement Investing > Annuity Investing

5 strategies to apply to suitable annuity sales, part 1

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By this point in time, chances are you know the long and agonizing story of producer Glenn Neasham better than every nursery rhyme you’ve ever heard, and you’ve probably even tired of his name. After the courts convicted Mr. Neasham of felony theft for selling an annuity to an 83-year-old client with dementia, the collective shudder that shot through the industry was nearly palpable. The aftershocks of this watershed event will likely reverberate throughout the industry for some time, and since no one wants to become the next face of elder-abusive sales tactics, it may forever change the way you sell annuities.

Personally, while I find it almost hard to describe someone who’s only 65 years old as a “senior” in this day and age, the facts—not to mention the law—are what they are. Selling annuities to seniors has always been a delicate transaction, but there are many strategies you can implement in your own practice to substantially mitigate the odds of the same thing happening to you.

Re-consider your recommendation

Is an annuity product really the absolute most appropriate investment option for your client, especially if they’re already of retirement age or older? Granted, you’re probably not planning on selling an annuity with a 20-year surrender period to an 85-year-old (although, tragically, there are producers who have perpetrated such vexing, cold-blooded crimes). You simply want to secure income for your clients’ lifetimes, but it may be too late in life for an annuity to be the best choice. While annuities can be great for people who are risk averse and want long-term product growth, annuities are not appropriate for everyone—and oftentimes, this includes elderly people.

Audio- or video-record all annuity sales sessions

Documentation is the key to maintaining suitability when selling any type of annuity. Just as you rely on your paper and electronic files to keep you organized and informed, using an audio recorder to maintain a verbal documentation of an annuity sale does precisely the same thing. It’s also just a plain-and-simple good practice to follow. Of course, videotaping client sessions and sales is a better idea. Not only does it give you a verbatim record of what transpired, but it can also serve as proof that you performed your due diligence and made an informed recommendation.

If you do decide to record your sessions with your clients, be sure you inform them of the fact beforehand. If they won’t permit you to tape the session, do your best to change their minds by reminding them that it helps to keep track of all the details of their particular sale, as well as how this practice ultimately serves to protect their best interests. If they still won’t yield, ask if your assistant or another advisor can sit in and take copious notes of the session.

In part two, we’ll explore three other measures advisors are currently (or should consider) taking to avoid becoming the target of an annuity lawsuit: asking that clients bring a trusted family member to sessions in which the sale of an annuity is discussed, waiting until the industry regulators put forth concrete guidelines for selling these products to seniors and finally, ceasing to sell annuities to anyone over the age of 65.

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