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Safety-first mentality leads seniors, boomers to annuities

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As they flee a capricious stock market, seniors and baby boomers are more open to so-called safe money products like annuities. That was the theme of a recent seminar sponsored by and Bankers Annuity Brokerage, “Selling Annuities in a Volatile Market.”

Moderator Daniel Williams, editor of Senior Market Advisor, began the discussion by pointing to recent surveys done by the magazine that indicate seniors and boomers are gravitating toward safety in their investments. Although seniors of the Silent Generation have always been more conservative in their investments, baby boomers who come from a more entrepreneurial generation are warming to safe money products as well. “They are tired of the ups and downs [of the stock market]. They want the safety of annuities,” Williams said.

For a replay of the webinar, go to:

Mark Pruitt, CEO, president and founder of Strategic Estate Planning Services, Inc. and Senior Market Advisor’s 2012 Advisor of the Year, said that after two years of doing workshops with prospects and clients, he has found that people want four elements in an investment: safety; growth; no or less taxes; and 100 percent liquidity at all times. Such a product “does not exist,” Pruitt said. However, he said that most people are willing to give up some liquidity for safety and growth and therefore, one solution could be a fixed lifetime income annuity.

Pruitt also said he educates clients on stock market performance over the past 100 years and how the variations in returns can impact a hypothetical nest egg. In particular, he stressed, clients don’t want to be in the stock market when drawing down retirement income. “This is why annuities fit,” he said. “They are guaranteed to keep up with inflation and provide an income stream for life.”

Jeff Bucher, president and co-founder, of Citizen Advisory Group, said most of his clients are “very concerned” about running out of money in retirement, which has led many to “hoard” their dollars. “That doesn’t do any good if they are afraid to spend it,” he said.

He also said that many clients tell him they don’t want to leave money for their heirs. “I don’t believe that for a minute,” Bucher said, explaining that what they are really worried about when they say that is outliving their funds.

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“We can show them that they can take control, turn off all the noise, and build their own pension and an income stream that won’t run out before they run out of breath,” Bucher said. “And they can give money to the kids.”

He pointed out that rates on fixed annuities still outpace CDs and “clients are looking for more money at higher rates.” Younger seniors in their 50s are beginning to understand the importance of building a contractually guaranteed income stream with an insurance company with an annuity, Bucher said.

With the fiscal cliff dominating the headlines, Bucher said it is a good time to focus clients on safety with a fixed annuity or a fixed indexed annuity. “With less at risk, they will lose less money,” he said. “They can take control rather than being fearful.”

Also important is establishing trust between advisor and client. Bucher said he establishes trust by educating clients about how particular solutions can help them, rather than simply selling products.

Pruitt agreed that educating clients can bring value to the relationship by telling them something they didn’t already know. He added that listening to clients and asking the proper questions is also vital. He said that he addresses the trust issue up front and tells clients that trust is earned over time.

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