Many independent annuity agents, long successful at selling to clients in person, are struggling to chalk up substantial sales in pandemic-imposed virtual meetings. It is one reason annuity companies are looking, increasingly, to broker-dealers for distribution, argues Stan Haithcock, aka Stan the Annuity Man, in an interview with ThinkAdvisor.
Meanwhile, says the nation’s self-described top independent annuity agent, financial advisors nowadays are, for a variety of reasons, selling fewer annuities. Haithcock reveals four causes.
Indeed, the industry as a whole is taking the wrong sales approach, Haithcock insists. Instead of pitching “the dream” of potential, they should “tell the truth and be brutally frank” that annuities are contracts. “People can handle the annuity truth,” he says.
Annuity sales declined industrywide last year, but Haithcock scored big in what he calls “a monstrous banner year.” In the interview, he tells why. The chief reason is his focus on contractual guarantees using fixed annuities only. Variable annuities can “go down in value”; consequently, they have no place among his offerings.
The former wirehouse advisor, who was with Dean Witter, Morgan Stanley, PaineWebber and UBS, contends that FAs “don’t understand” annuities’ powerful transfer-of-risk benefit proposition nor the great opportunity for annuities to fill a “huge void” left by the elimination of private-company employee pensions.
ThinkAdvisor recently held a phone interview with Haithcock, speaking from Ponte Vedra, Florida, where The Annuity Man LLC is based. He has written seven books on annuities, and his YouTube channel serves up five new educational videos a week. His podcast is called “Fun with Annuities.” In the interview, The Annuity Man reveals the fun of annuities.
Here are highlights of our conversation:
THINKADVISOR: Annuity sales fell 7% in the third quarter of 2020 vs. the previous year, according to the Secure Retirement Institute. And when I interviewed retirement expert Professor Moshe Milevsky last November, he noted the year’s decline. How were your own sales in 2020?
STAN HAITHCOCK: We had a huge, great, monstrous, banner year. Here’s the reason: There’s a demographic tidal wave of 10,000 baby boomers over age 65, and they need guarantees, period. I focus only on contractual guarantees. I don’t talk about hypotheticals, theoretics or projected anything.
But why did annuity sales, in general, fall last year?
It’s the industry’s fault that sales are down. It isn’t focused on the right products or the right solutions. The mistake made by people that sell annuities is that they don’t focus on the contractual guarantee.
Are you including financial advisors?
Absolutely. I don’t think advisors truly understand the transfer-of-risk benefit proposition that annuities provide and that annuities have a monopoly on lifetime income. In [today’s] pension-less world, where less than 10% of private companies offer pensions, annuities are the pension. So there’s a huge void that needs to be filled.
Any other reasons that FAs aren’t selling more annuities?
I think a bigger issue is that they don’t want to lose control of the [clients’] money. They want to wrap the money. Or they think they can do better, and maybe they can. But most [clients] want guarantees.
What’s a major challenge right now to selling annuities?
COVID has forced the annuities agent-army and advisor-army to do Zoom [virtual] meetings. For all those who’ve sold annuities face-to-face their whole life, making that transition is really hard.
Even for financial advisors?
The brokerage firms have done a pretty good job of keeping up with technology [virtual meetings], but the independent agents aren’t as technically savvy. They’d better get up to speed very quickly because the carriers are going to demand them to. If they don’t, it’s going to hurt them. This is the biggest challenge for independents and a lot of the reason annuity companies are going toward the broker-dealers now for distribution.
In a recent newsletter, you wrote: “You can’t polish a turd — but you can roll it in glitter.” Please explain.
Annuities are contracts, but agents are always trying to make them sound better than they seem. You can roll an annuity around in glitter, but it’s still a contract. You can polish it up and make it shine at those bad-chicken-dinner seminars and in TV and radio ads. You can sales-pitch people to death. But they’re still going to get a contract.
How should agents sell annuities, then?