Insurance carriers are a convenient whipping boy for agents. When in doubt, blame the carrier. High rates, poor service, weak products.
Give credit where credit is due, though: the industry has stepped up over the last few years regarding the quality of fixed annuity products. Fixed annuities have become solid options for clients looking to play defense with their savings. That’s why some big, well known firms are jumping onboard. Just look at the Limra rankings.
Yet, many independent agents remain on the sideline, missing a great opportunity to build client relationships with an important product.
Every day has at least one call with an agent fretting about whether or not to start selling fixed annuities. Below are some of the questions agents ask before getting started with annuity sales.
How do I get started selling annuities?
Drew: Life insurance is about protecting people. Fixed annuities are about protecting money.Both are insurance products but don’t confuse their place in a client’s portfolio (and mind). The process and approach to selling is very different. The annuity sales process can be long and tedious, often that way to give clients time to get to know and trust you. We’re talking about money here. From a product standpoint, fixed annuities are defensive in nature, unlike their riskier cousin variable annuities, that are market based. That’s why they are such a great fit with Redbird’s “defensive” approach with clients. If you’re not offering fixed annuities you are missing a great opportunity to deepen client relationships.
I read a lot of articles that criticize fixed annuities, the message being that if it’s too good to be true then it probably is. So, what’s the deal?
Drew: The deal is there is no perfect product. Fixed annuities are right for clients looking for more conservative/defensive products outside of the markets. They aren’t for everybody or for every situation. Our job is to ask good questions to ensure we fit a round peg with a round hole. Redbird’s “Thumbprint” process (more detail below) is a great way to start the process of determining if fixed annuities are the right solution.
What keeps life insurance agents from selling fixed annuities?
Drew: Many of them simply can’t get out of their comfort zone. We work so hard to get in front of clients, but so often walk away from additional opportunities because we simply didn’t ask more questions. Redbird’s Thumbprint process provides you a structure to take the discussion to the next level and get a second meeting.
Simple questions like:
- Do you have a savings account?
- Do you have a money market account?
- Are you happy with the interest you’re making?
Answers to those questions are the fuel for the next meeting. The other thing that trips up agents is their fear of not knowing all the answers. Nobody knows all the answers! Some of our most successful agents still will call me when they are with a client if a question comes up they can’t answer.
What are the differences between a Fixed Annuity and Indexed Universal Life Insurance?
Drew: An annuity is a tax deferred growth product to help the client either pass money on or use the money when they are retired. Indexed Universal Life is life insurance that is paid upon death. Yes, you can access the cash value in the IUL policy, but you can’t access the death benefit unless there is a critical or terminal illness. While every client’s needs are unique, these two products are often complimentary pieces of clients’ long term plans.
How are annuity allocation/crediting methods determined?
Drew: Clients have multiple options or, as I like to call them, buckets, where they can direct the type of investment for their fixed or indexed annuity. The industry calls them indices. As you can imagine, each carrier has its own “buckets”. It could be the S&P annual point to point or quarterly point to point, or a fixed account where today they might get a blistering 1.15%. Every carrier is different, and that’s what makes it so difficult if the agent isn’t ready.
Where agents get in trouble is if they don’t prepare properly. The smart agent looks at the application before they go near the client. I wish agents would pick up the phone and call us before they meet with a customer. More than anything the mistakes they make are not asking enough questions to ensure they fully understand the client’s needs. And, as we know, client needs can change rapidly.
You always talk about Services Offered, how does it open doors for annuity sales?
Drew: The idea of Services Offered is to generate questions from the client. By simply taking them through what you offer is an invitation to the client to engage. When I talk about our retirement solutions I always ask if the client has investments in the market that they are worried about losing. If yes, then I say we have options that might give them some comfort.
What is RMD and how does it impact clients?
Drew: RMD means required minimum distribution. The U.S. Government requires any person with qualified money such as pensions, IRAs, 401ks, etc. to start taking distributions from those accounts when they turn age 70 ½. What clients need to be concerned about is not so much RMD but where they have their money in the years before age 70 ½ so they actually have money left to be distributed when they need it most. What if you were nearing that age back in 2008 and you had your money in the stock market or in your company’s stock? At that point you have no time horizon left to re-capture your losses but you’re still required to take a RMD every year, PLUS you’re paying fees. Agents should be helping their clients think through these options before it’s too late.
Redbird’s newest Partner makes grand entrance
Just when we were about to kick off a great day of watching college basketball last Saturday, our plans were turned upside down by a little person not to be denied.
At about noon, Claire Georgia Gurley decided she had been in the oven long enough and surprised us all with a grand entrance. She starts her career in the welterweight division having come a few weeks early, but she and Carrie are doing just fine. She joins big sis Gretchen in the Gurley corner.
Oh, and Dad’s doing fine as well… thanks for asking. For those of you who got some welcome relief this week from seeing Drew’s name on your Caller ID, the party is just about over. He’s back in the saddle come Monday.
Well wishes can be sent to drew@redbirdadvisors.com.
Redbird Chirps
- Are you growing? If your start-up is growing you have a lot of tough decisions ahead. From hiring to finding mentors, there’s a lot to do to build your company. StartupCollective provides great advice this week for every segment of a new business.
- The No Complaining Rule. Complaining is a kind of cancer for any business. Meet Dwight, who had seen what complaining can do to a company and was determined his company would not become another statistic. Here’s the rule: You are not allowed to complain unless you offer a possible solution. This applies to large companies or entrepreneurs; something we all can learn from.
- What’s in and what’s out? Dave Ramsey takes a stab at what will catch our fancy in 2015 and what is in our rear view mirror. Used cars?
- Fact Finder: never leave home without it. Get prepared to help your clients get prepared. Our Fact Finder provides an excellent platform to better understand client needs, plans and concerns. Click here to download the Redbird Fact Finder.
