3 Ways to Overcome the One-Size-Fits-All Mentality in Annuities

On the surface, this sounds better than the traditional sales model.

But the approach is ultimately disingenuous for one key reason: Like the traditional (or product-focused) model, many wholesalers here would generally only have access to only one or two products.

THREE. The Strategy-Based Wholesaling Approach

(Full disclosure: this is the approach Global Atlantic takes.) Similar to consultative selling, the focus here is on getting to understand what kind of client needs an advisor is trying to satisfy.

The main difference is that, unlike the companies using the other approaches detailed above, companies that use strategy-based selling generally have a full suite of products to choose from, eliminating the need to push one particular product that may not be optimal for the end-user. Instead of a wholesaler driving the conversation and leading with a product, the advisor often drives the conversation to discuss his or her most pressing client problems, and the wholesaler can talk through a strategy that might be appropriate. Through this process, advisors and wholesalers have ongoing one-to-one conversations about client needs, and the advisors come to view the wholesalers as more than just sales people.

For instance, suppose an advisor works with a married couple, both age 60 and each with 401(k) plans, but the husband also has an IRA that he would like to preserve for his wife should he predecease her.

However, there’s a catch: even if they don’t need the money when he’s alive, the IRS requires people to take required minimum distributions (RMD) from their IRA every year beginning at age 70½. With a strategy-based approach, the wholesaler isn’t scripted to promote a specific product. Instead, she’s free to identify the couple’s income and estate planning needs, their risk profile, and address their most pressing financial concern: that the surviving spouse doesn’t run out of money.

Choosing from her product suite, the wholesaler may then recommend using the IRA assets to purchase a joint and survivor income annuity that would provide them with steady income that would continue at the same level even after either spouse dies. If the advisor were to keep the husband in the IRA without purchasing the annuity, he would need to take the RMDs at 70½ years old, his account balance would diminish, and upon his death, his wife would inherit just the depleted asset value (if any).

With the annuity in the IRA, they’ll still need to take RMDs at 70½ but the income won’t be exhausted, assuming no excess withdrawals. Again, this approach starts with the client’s needs first and works to the product that makes the most sense.

Knowing that these different approaches exist, we would encourage financial advisors to seek out relationships that are transparent and mutually beneficial. In an industry as diverse and competitive as investment management, there is no reason to feel beholden to one product, or to a wholesaler with only one product at his or her disposal.

— Read Phoenix Issues First New Annuity Since Nassau Re Deal, on ThinkAdvisor.

Paula Nelson is the president of Global Atlantic Financial Group’s retirement business. To learn more about Global Atlantic, view the firm’s website: www.globalatlantic.com.