Let’s start with a little exercise. Repeat after me:

  • “You don’t need an annuity.”
  • “An annuity is not the right product for you.”
  • “Right now, an annuity doesn’t fit your needs.”

Feel better? Well, you should, because you need to be prepared to say this a lot as the popularity of annuities continues to ramp up along with ongoing misinformation about the product.

As long as Internet pop up ads or local radio ads “claim” 6 percent, 7 percent, 10 percent-plus guarantees (without mentioning the word rider), agents and advisors will continue to receive calls from potential customers wanting to find out if the annuity product is as good as the ad describes. I get tons of these calls wanting to either hear the truth or have me hopefully validate the dream they just bought.

The funny part about almost every call is that they always start out telling me what they think the product does, or what they thought they heard during the sales presentation. They will mention a bonus, or an unfortunate phrase like “it pays 7 percent.” It’s hilarious, and disturbing, because it always seems like they hang on to a couple of irrelevant bullet points. I always stop them during their regurgitated pseudo presentation and start asking questions about them (not the product), and what they really want the money to solve for. I could care less about any of the product details their brains are holding on to. The primary question that has to be asked and answered is: “What do you want the money to specifically do and solve for?”

Then after that question is asked, we, as annuity agents and advisors, need to do the one thing we can all improve on and be better at. That one thing is the ability to LISTEN.

Refer to a specialist

People who recommend annuities need to be able to listen to the clients and prospects, ask good qualifying questions, and hopefully match their goals with an annuity strategy that contractually solves for their specific transfer of risk need. If you realize that an annuity is going to be a square peg trying to be fit into a round hole, then you have to refer that business to another specialist that can provide an appropriate solution that you don’t offer.

Doctors refer to specialists all of the time. Heart surgeons don’t work on people that need foot surgery. Lawyers specialize all of the time and consistently refer to other lawyers that can help within a specific area of knowledge. I personally refer all life insurance and long-term care to people I know who specialize in those solutions. Yes, I could sell those products, but I would be doing a disservice to the client because that is not my primary area of focus.

For the RIA, broker and securities-licensed advisor, their product shelf is full of numerous choices that also include annuities. For the rest of us out there that only recommend annuities (i.e., myself), we have to face the reality that a lot of times an annuity isn’t the correct, appropriate or suitable product. We annuity only agents have to, without hesitation, tell the truth when the specific situation doesn’t warrant an annuity.

Just because someone is a baby boomer doesn’t mean that they need an annuity. Just because someone needs income doesn’t mean that they must have an annuity. Just because an annuity has the highest bonus or highest percent rider doesn’t mean that every portfolio should make room for one. I’ve chosen to build my company as “annuity only,” so I am obviously a big believer in these transfer of risk strategies. That’s an understatement, but it doesn’t mean that I’m in constant annuity pitch mode. It all has to do with the answers to a few questions, and me actually listening to the person’s response:

  • “What do you want the money to do?”
  • “What specific goal do you need to contractually solve for?”
  • “What type of risk are you looking to transfer?”

Instead of launching into your FMO’s product flavor of the month (I hate their cheesy product emails!), make sure that the person you are listening to even needs an annuity. Over the past few years, I have found that over 30 percent of the people who contact me directly DO NOT need an annuity based on their answers to specific questions.

I think that it is somewhat instinctual from a sales standpoint to have a “pitch” always at the ready. That’s what has been taught for as long as sales have existed (insert joke here). All of us have our own unique takes on specific issues and we all have our own selling style. However, suitability and appropriateness requirements will always demand customized annuity solutions based on specific client needs.

So when that next annuity prospect steps up to the sales plate, don’t immediately go into your “product wind up.” Instead, ask a few key questions to find out if they even need to be in the annuity game.

For more from Stan Haithcock, see: