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What’s your annuity time frame?

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If there was ever a loaded annuity question, it’s this one: What’s your annuity time frame? The answer(s) truly depends on who is asking the question, and who the question is being asked to. Let’s take a look at this interesting multi-faceted question from a few viewpoints the client’s, the agent’s, the carrier’s and our beloved annuity industry leaders’.

Client time frame

If we were going to rank these in order, the client’s annuity time frame consideration would be #1 hands down. In annuity agent class 101, the client’s time horizon should be one of the primary (if not the primary) considerations for any annuity recommendation. That means that the 10-year or 14-year annuity that pays such a high commission that agents seem to sell the most of those might not be compatible with the client’s time frame. Shock! They might need a shorter surrender charge time period, and at a minimum, should at least know if a shorter chassis exists. It goes without saying that the annuity chassis and surrender charges have to be fully explained and understood by the client, with shorter durations of the strategy to always be shown if available.

The other client “time frame” that is as important in my opinion is the sales process time frame. A client or prospect that is considering a purchase of an annuity should make that buying decision on their time frame, and after the strategy has been fully explained and the appropriate information given to them for review. High-pressure, one-call close tactics aren’t long-term business models, which means the client should always call all of the shots and dictate the how, when and where of any annuity sale. 

Agent time frame

The easy answer to this question from the agent’s standpoint is “who cares?” That’s because the client’s time frame should always be the most important. There really is no agent time frame that should be on any legitimate list. The one time-frame exception that I would challenge agents to embrace is that when you recommend an annuity, you should do so with the goal to be around when the surrender charges go away or when the client plans to access a rider or benefit. I’m afraid that too many agent recommendations are made with no intention of being around for the long term. This is just one of many things that must change from the agent standpoint for the annuity industry to be taken seriously. 

As for the sales process time frame, agents need to tread lightly in this area and always ask themselves if they would like to be on the receiving end of the sales pressure they might be inflicting. I’ve been told that the leading Internet annuity hypesters send a high-pressure email every day to people that have signed up to watch their too-good-to-be-true video pitch. That’s in addition to giving the lead to a local agent who is chasing down the prospect as well. I call this “submission selling,” which means pounding the prospect into submission in order to sell them an annuity. It’s no wonder why these Internet-driven agents have such a bad reputation with tactics like this, which is unfortunately being replicated by many “wanna-be” agents as the way to do online business. Sad, but true.

Carrier time frame

More on this topic

Up until recently, this really hasn’t been in question because for decades annuities have been boring, actuarially driven products that were primarily purchased for the contractual guarantees. However, recent benefit buyback trends with some variable annuity carriers have brought into question specific carrier intentions and time frames. In addition, the recent entry of private equity and hedge funds as annuity carrier owners has raised eyebrows and concerns as well. The jury is still out on how long the time frame truly is for these “masters of the investment universe” new owners. 

Industry time frame

I am not on board with the overall “annuity message” currently in place and voice my opinion on this matter every time I get the opportunity. I know that with over $200 billion in premium rolling in annually, life is pretty good throughout the annuity world. In addition, a demographic tsunami of 10,000 baby boomers retiring every day along with the thirst for lifetime income benefits pretty much guarantees industry “success” regardless of what strategy is chosen. What a neat job to have, knowing that any dart you throw is a winner.

However, if the industry looked at the annuity “time frame” as the home run that it is, they would be doing all of us a huge favor. The industry “time frame” should be urgent from an implementation standpoint, and both the short-term and long-term message time frames should be the same, consistent and insanely repetitive. How about: Annuities are great transfer of risk strategies that should be owned for their contractual guarantees and can be the peace of mind solution for lifetime income. 

Stop trying to compete with the stock market. Stop pushing complicated products. Stop acting like the rich kid who just inherited a lot of money and can’t be motivated. Take action, and start embracing simplicity, transparency and contractual guarantees.

So the next time you are sitting with a client or prospect, remember that their time frame is the most important. Agents need to stop selling annuities like they have terminal cancer. Plan on being around for the duration of the annuity contract, or whenever the client plans on utilizing an attached rider. It’s the right thing to do.

For more from Stan Haithcock, see: