If you are a fan of the recent TV sitcom, “Seinfeld,” then you remember George Costanza (played by Jason Alexander) sitting in their local meeting place restaurant and telling Jerry, “It’s not a lie…if you believe it.” That’s pretty funny on the surface, but the annuity industry does seem to suffer from occasional annuity delusion from top executives to FMOs and all the way down to the agent. It’s time for the annuity industry, top to bottom, to clean up the message as we address the tidal wave of people needing the retirement guarantees that annuities provide.
In previous LifeHealthPro.com columns, I have addressed the need for higher agent education standards, inappropriate agent one-size-fits-all selling tendencies, and appalling bait and switch Internet advertising. So let’s address some other current annuity “whoppers,” and hope that all of these issues represent moment in time and not an ongoing “circus mirror” trend.
Blurring the line between yield and income riders
I can see George Costanza right now as an annuity agent giving a product presentation at a “bad chicken dinner” seminar and eagerly throwing out guaranteed numbers like 6 percent, 7 percent or 8 percent without the full explanation, and then piling on with the upfront bonus “cherry on the top” close. We all know that riders are not yield, and that income riders are monopoly money if not used for that specific purpose. By the way, that’s OK, but we have a duty to the annuity brand to make sure that the client totally understands income rider liquidity limitations. Agents also need to stop “leading” with these high percentage numbers in their ads and product promotions. Not only does that apply to agents, but the sizzle-selling FMOs as well.
Reasonable rate of return
I’m starting to hear this line more and more, especially in my local area and on agent (never mentioning the words indexed annuity) TV ads. What a vague piece of garbage phrase in my opinion. Sounds like an energy supplement or vitamin claim, and it means absolutely nothing. This triple RRR (reasonable rate of return) Pavlovian-drooling-dog pitch is a psychological and subtle hammer. When RRR is used, I am assuming that the agent is hoping the customer is filling in the blank with their own version of a very high RRR percent. Why not just quote the last two Beacon reports on FIA returns and have the client’s expectations in line with reality? There is absolutely nothing wrong with that, and agents need to remember that indexed annuities were developed to compete with CDs, not the stock market.
Everyone needs an annuity
Short answer…no they don’t. Annuities solve for specific issues, and not everyone needs this type of transfer of risk solution. Fortunately for all of us annuity agents, a lot of people do need them, but these strategies have to be customized for each specific situation.
Agents charge no fees