Single premium immediate annuities (SPIA) are great fixed insurance vehicles for clients who are looking for a guaranteed stream of income. Payments can be structured to meet a client’s specific needs.
However, I’ve recently seen a trend of advisors recommending elaborate riders to “help” a client’s investment along. More often than not, these riders aren’t needed and can often reduce a client’s overall earning potential.
A simple, straightforward annuity sale can help ensure your clients get the most bang for their buck and meet their investment goals. Instead of positioning a deferred annuity or a fixed indexed annuity with an income rider, in many cases, a fixed immediate annuity is the right option. The following tips can help determine if this choice is right for your clients:
Tip 1: Get to know your clients’ financial goals
Fixed annuities are a great investment vehicle, especially for clients who are nearing retirement age and looking for a safe place to accumulate their funds before retirement. However, it’s important to get a grasp on their long-term goals to ensure you’re recommending the right purchase.
To help do this, ask your client if they need immediate access to income and how much money they need in the next five years. The answers to these questions will help you gain insight into your client’s timeline for accessing their money and determine if an immediate or fixed indexed annuity is the right choice.
Tip 2: Avoid recommending potentially unnecessary riders
Many advisors go into a sale recommending the most robust annuity possible. This may include adding numerous bells and whistles in the form of elaborate riders, such as a guarantee minimum withdrawal benefit rider, to generate an income stream.
Depending on your client’s financial goals, this type of rider can significantly reduce his or her earning potential. Immediate annuities provide clients with instantaneous access to their money — almost negating the need for a rider altogether.