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January 28, 2015 at 05:26 AM
Annuities aren’t always an easy sell — the lack of overall awareness about how they work, along with media coverage of financial abuse and poor guidance, has created a tarnished reputation in the eyes of many consumers.
“The marketplace is rife with negative press about annuities,” says Steven A. Plewes, CLU, ChFC, principal of Advisors Financial Group in Bethesda, Maryland. “However, in the last couple of years, the media has turned a more favorable eye toward using annuities to fund retirement income. But annuities are a complex product. Even something as relatively straightforward as a single premium immediate annuity has some moving parts. I’ve always viewed the marketing of annuities as a part of a process.”
See also: Is 2015 the year of the annuity?
We asked numerous advisors, marketers and experts to share their marketing strategies and annuity sales success stories. Their answers are far-reaching and include tailoring and combining annuity features, discussing client fears, virtual meetings, marketing yourself first, and, when appropriate, advising that the client not invest in an annuity at all.
Acknowledge the reputation.
“I have had success emphasizing exactly how an annuity fits into a client’s retirement plan. When the client understands exactly what he is paying for with an annuity, you overcome the immediate objection of ‘annuities are too expensive to own.’ Our typical practice is to use annuities for approximately 20 percent to 30 percent of a client’s income in retirement. This further diversifies a client’s portfolio and provides the ‘anchor’ for retirement. It is a sustainable and predictable piece to their retirement income. We use living benefits exclusively within the annuities we market because they help to define why the client is purchasing an annuity to begin with.” — Jason J. Dudum, LUTCF, Chief Executive Officer, Dudum Financial
“I don’t think mass marketing annuities works very well, if at all. The word ‘annuity’ still has a negative connotation for many prospects and clients that I meet with. I can’t tell you how many times I’ve had a client or prospect say, ‘I don’t know why I don’t like annuities; I just know that they’re bad.’ What I do is position an annuity as a bond ladder alternative in a client’s portfolio. I explain that building a bond portfolio doesn’t make sense in this low interest rate environment with the potential for principal losses when interest rates rise. I use fixed indexed annuities that provide 100 percent downside protection with some upside potential. I explain that the annuity allows 10 percent free withdrawals every year (if over age 59.5), similar to what you would get in a bond ladder, but it also provides 100 percent downside protection and future income benefits. This gives us a better return than bonds without the interest rate risks.” — Nick Reiland, Vice President of Investments, Upstream Investment Partners, Lisle, IL
“Annuities have had a bad name for a long time. We use social media sites, like LinkedIn and Twitter, to brand ourselves and help provide education to the public. This gives people access to information, and with that knowledge the reputation of annuities does seem to be changing.” — David T. Buckwald, CFP, Senior Partner, Atlas Advisory Group, Cranford, NJ
Lead with the plan, not the product.
“I never lead with the product. I always lead with the plan that’s appropriate for the client’s particular situation. Annuities have a prominent role in three distinct scenarios. For all of these scenarios, we start with a bucket plan, which includes a bucket for now, soon and later money.
1. For a client who needs an income source in the ‘soon’ bucket, we use an annuity to structure a secure income stream, providing a time horizon to continue to invest the ‘later’ money for growth. We feel that this helps to reduce the ‘sequence of risk’ — the risk of having to pull income from investments during down times.
2. For clients who are worried about running out of money in retirement, we use an annuity in the ‘later’ years to structure a personal pension. This provides stability in the plan by giving them income that they cannot outlive.
3. Pending the client’s situation, we use annuities with riders for things like income replacement or LTC.
— Jason L. Smith, Founder and CEO, Clarity 2 Prosperity; Founder and CEO, The JL Smith Group Tax and Wealth Advisors, Cleveland, OH
“It’s a common pitfall to lead with a specific product in client conversations. Because they must stay abreast of the latest product features and pricing, financial professionals may naturally start with an annuity they like and then back into how its features might help meet their clients’ needs. The problem is, this approach can fail to address critical needs simply because they haven’t been identified. Reverse this process, and you’ll see meaningful results. Start with uncovering your clients’ concerns and the protection they already have, and then use this information to select the most suitable product.” — Mark Fitzgerald, National Sales Manager, Saybrus Partners, Hartford, CT
“It’s important to avoid annuities that are too complicated to explain. I lost a client because I spent too much time ‘in the weeds’ explaining the differences between living benefits riders from three carriers. I learned a valuable lesson to keep things concise and simple. To help simplify annuities, use stories to communicate with the client. Anecdotes of other clients or other advisors’ clients help illustrate how the annuity gave them a sense of financial peace and security.” — Adam A. Solano Jr., Lakeside Financial Group, Grayslake, IL
“Right now we are working with a retired Wall Street professional worth $9 million. He wants to receive a yearly income of $350,000 a year. We modeled various scenarios and created a well-rounded portfolio that included putting a portion ($1,750,000) of his money in annuities. That, along with Social Security, got him to the yearly income he was hoping for. He now travels, plays golf and spoils his grandkids — living his retirement dream.” — David T. Buckwald, CFP, Senior Partner, Atlas Advisory Group, Cranford, NJ
Do not underestimate the power of peace of mind.
“A husband and wife came to our office in 2007. The husband was a highly paid attorney. At that time, we put $300,000 in a fixed annuity with an income rider and 8 percent return. Last year the husband passed away. The wife came to the office and had a fairly substantial income that she was concerned wouldn’t be replaced. We explained how the income rider worked and that it was being turned on. The wife began to cry and said, “I’m going to be OK, aren’t I?” We were glad to have been able to give her that peace of mind.” — Jason L. Smith, Founder and CEO, Clarity 2 Prosperity; Founder and CEO, The JL Smith Group Tax and Wealth Advisors, Cleveland, OH
“From the start of my mother’s retirement, another relative managed her money and had her invested primarily in mutual funds and bonds. Every time the market moved, she worried. As she got older, her worries became more frequent and more intense; it was all she could talk about. Finally, my sister asked me to manage my mother’s money and to see if we could give her some peace. I took over and put two-thirds or her money into annuities and one-third into the stock market. This way she would have a sustainable, steady income. That was 15 years ago, and she is still receiving an income from that source. Once I put her money into annuities she calmed down, as she could rest easy that she now had a reliable and predictable income stream. It was very gratifying to help my mom enjoy her life more.” — Willie Shuette, Financial Coach, ChFEBC, The JL Smith Group, Cleveland, Ohio
“I have a client who was referred to me and needed an advisor because she was going through a divorce and her retirement plan with her husband was no longer applicable. Her concern was that she wouldn’t have enough income in retirement. She is 49 and received half of the retirement assets that she and her ex-husband had accumulated. And by utilizing an annuity with an income rider, we were able to generate the income she desires at retirement at age 62.” — Jeremy Reiland, Investment Advisor, The Chamberlin Group, St. Louis, MO
“I use annuities often, and my clients are satisfied with these accounts. One client initially liked the guarantees that the annuity provides her, but didn’t foresee needing the income guarantees. A few years later, one of their main income sources disappeared and this changed her entire financial situation. She was relieved to be reminded that we already had a plan for a situation like the one she was facing, and we were able to replace the majority of her lost income with the income guarantees that the annuity provided.” — Jennifer Landon, Retirement Advisor, Journey Financial Services, Inc., Idaho Falls, ID
Actively ask and listen.
“The best way to market annuities is the same as the best way to market any other financial product: Begin your discussion by finding out what your prospect’s needs, wants and concerns are. If you start by pitching a presumed product solution, you make two big mistakes:
- You reduce the chances of making a sale, because the product you have in mind may not be appropriate for the prospect’s needs you didn’t bother to discover. Sooner or later, that will become obvious.
- If that happens, you will have wasted both your time and your prospect’s. And you will have torpedoed any chance of establishing yourself as a trusted advisor for that person — and anyone whom he or she might have referred to you.
It’s not hard. You simply need to start out by asking questions and listening.” — John Olsen, CLU, ChFC, AEP, President, Olsen Financial Group, St. Louis, MO
“One of our advisors just closed her largest annuity case with her drycleaner. She simply asked about the owner’s plan for his retirement. This started a conversation which led to her realizing that this was only one of a number of drycleaners he owned. A couple million dollars later, he was a client for life. It all started with one simple question, “What are your retirement plans?” — Jason Kestler, President and CEO, Kestler Financial Group, Inc., Leesburg, VA
“There are four critical questions to ask your clients. Conversations with your clients about annuities should start with the four basic planning needs in retirement: accumulation strategies, income level needed and sources, health care expenses and leaving a legacy for loved ones. Choosing the right approach means asking the right questions that will uncover your client’s most pressing needs: Are they worried about outliving their savings? Are they concerned about possible future illness? What are their existing sources of retirement income? How much of their existing retirement income is guaranteed? Your clients’ answers will help you identify the protection gaps that cause them the most worry, and your final step is to match your client with the product that will best fill those gaps.” — Mark Fitzgerald, National Sales Manager, Saybrus Partners, Hartford, CT
“Start with a clear understanding of what the client is trying to accomplish. We don’t talk about products of any kind until we know what the client wants to do. For example, some people are trying to create a plan for retirement income. Annuities are one of the only products that take longevity risk off the table and guarantee an income stream for life. Longevity risk is perhaps the biggest risk retirees face with their money. That makes annuities a viable option for people who want to use their savings as an income stream in retirement.” — Jennifer Landon, Retirement Advisor, Journey Financial Services, Inc., Idaho Falls, ID
Discuss the variety of protection. 
Gain trust by putting the prospects’ best interest first. 
