As they say, knowledge is power. And the more advisors know about their prospective annuities clients — and what they really want — the more successful they’ll be in marketing these products to the right individuals. Armed with the right information, advisors can increase the likelihood that customers will be not only receptive, but will buy into these contracts.
LIMRA’s Facts of Life and Annuities report found that deferred annuities, regardless of product type, are mainly being purchased to supplement retirement income, but other top reasons include accumulating assets for retirement, receiving guaranteed lifetime income and covering basic and discretionary expenses in retirement. Annuities are an important income source to many retirees. Thirty-five percent of retirees receive income from annuities, and of these retirees, 40 percent receive regular monthly payments guaranteed for life, according to the report.
To get an idea of the factors that make annuities owners purchase these contracts as well as the reasons why others don’t own annuities, The Deloitte Center for Financial Services and Research Now conducted an online survey in December 2014 of 745 buyers and 757 non-buyers of annuity products to determine both groups’ attitudes toward annuities. Survey participants represented a wide range of age and income groups, and were evenly split between men and women. Deloitte queried annuity buyers about their financial objectives, motivating factors, influencers, product knowledge, the role of advisors in their purchase decision and their satisfaction with the product. Deloitte asked non-buyers — evenly split between those who had considered an annuity purchase and decided against it, and those who never considered buying an annuity — about their annuities knowledge, shopping experience, concerns and potential barriers to ownership.
The Deloitte report based on the survey, Voice of the Annuities Consumer, reveals just what makes a prospect more likely to buy an annuity and finds that there are some barriers that get in the way of an annuity contract. According to the research, many people still don’t know what annuities are and how they might benefit them.
“Our survey found widespread unfamiliarity with the value of annuities and how they work, even among many who have already purchased one,” the study says. The results also prove that “intermediaries overwhelmingly remain the lynchpin in reaching out to prospects about annuities and walking them through a sale,” although some prospects — particularly those in the 30- to 44-year-old age group — are open to hearing directly from carriers.
With a better understanding of their customers’ attitudes about annuities and their buying behavior, advisors can boost annuities contract sales by implementing the following six measures:
Inspire trust. Delivering a great customer experience builds trust and trust creates value.
If at first you succeed, sell, sell again. Those selling annuities should increase their focus on repeat buyers and take advantage of cross-selling opportunities. In fact, more than four in 10 (42 percent) of annuities buyers responding to the Deloitte survey said they already owned at least one other annuity before signing on for their most recent annuity. ”Even more encouraging is that 73 percent of these repeat buyers bought an annuity in addition to, not as a replacement for, their prior purchase,” the report says.
Stress the value proposition. An Ernst & Young Voice of the Customer study shows consumers are receptive to targeted cross-sell offers if the value proposition is clear and the buying process is easy and convenient.
Ask for Referrals. Don’t be afraid to ask for referrals from clients you know are happy with their annuity purchase. LIMRA research reveals that more than three-quarters of annuities owners are satisfied with their purchase, and five out of six recent annuity buyers would recommend an annuity to a family member, friend or colleague.
Appeal to buyers not yet focused on retirement. Advisors can generate interest in annuities among younger prospects. Nearly 40 percent of the non-buyer respondents in the Deloitte study said they would likely wait until they are approaching retirement age to purchase an annuity. “Getting this segment interested in annuities earlier may require changing the conversation from pure retirement security issues to other potential uses for the product in earlier life stages,” the report says. “For example, a lower-cost, less complex, and more limited ‘starter’ annuity for younger age brackets could provide annuitized outlays for a child’s eventual college tuition, or even help recent graduates and their parents pay off student loans after graduation.”
Educate, educate, educate. The Deloitte research found a widespread lack of familiarity with the value of annuities and how annuities function, even among many individuals who have already purchased an annuity. Advisors must have a solid understanding of each contract they’re selling, of course. Then they should spend ample time detailing how each annuities contract works — including information on the annual reset in an FIA, for instance — and asking questions to determine if the customer understands the benefits of each annuity and what it can do.