Selling Fixed Annuities: Ultimate Guide to Learning and Selling

Selling fixed annuities is definitely a shiny object for many life insurance agents.

Just about every story you read gives you a pile of reasons why you should jump on the annuity sales bandwagon (not the least of which is the recent slide in the markets). Everything from how to sell annuities to seniors, selling annuities over the phone, and selling annuities online.

Who the heck would make a decision about their retirement savings over the phone? It’s almost as bad as thinking your customers might actually consider buying annuities online.

Unfortunately, a lot of agents take the bait, and fail miserably. Selling fixed annuities is not as easy as falling off a log.

Why?

Getting a client to understand the role of annuities in their overall financial plan is just as hard for a fixed agent as it is for the registered rep pitching market-based products. An annuity sales takes time to uncover all external factors which impact the client’s decision.

In this guide we’ll not only discuss the questions you should ask yourself before starting to sell annuities, but also a lot of the basics you need to know along the way. Below is a glimpse of what you’ll find…

Six Questions you should ask yourself before learning how to sell annuities
Annuities 101
Licenses required to sell fixed and indexed annuities
Annuity commissions (Download the income estimator to really see your earning potential)
Questions to ask when selling annuities
Annuity sales scenarios: FIA, MYGA, and SPIA
Annuity sales scenarios

There is a lot of great information listed, feel free to reach out to us if you have any questions at all. We’ll continue to update this resource.

Who does this article support?

We’re looking to educate agents that instinctively understand the value of problem solving for their clients. There is not a once size fits all annuity solution.

You need to really understand the objectives of your clients, and producers that naturally possess that mind set are always the ones that experience the most success selling annuities.

Below are some considerations we feel compelled to share, considerations that you will learn over time to wildly appreciate.

Appreciate the power of using FIA as an accumulation strategy when the scenario makes sense for your client. Guarantees are great, but sometimes accumulation potential is just as important to your clients.
Utilizing FIA with an immediate income capability vs. assuming it’s only a solution for a SPIA.
Open minded to understand how to leverage capped products vs. uncapped with participation rates.
FIA with income rider is not the same as a SPIA!

Clearly there are a lot of scenarios we could discuss, but the point here is that we are looking to help agents that have an open mind to learning new things and offering educational concepts to their clientele.

Let’s get into the good stuff now!

Selling fixed annuities is not about the product or the money… it’s about your clients.

So, rather than torment you with the same old reasons why you should consider selling fixed annuities, let’s first turn the tables and see if you’re right for the job. If you believe you’re fit to sell annuities, then we would love to chat and teach you how to get started.

1. Do you have strong reasoning skills?

Fixed Annuities force you to consider a great many more issues than life insurance. It’s like the difference between checkers and chess. Sometimes with annuities the obvious answers are the worst answers. You have to guard against jumping to conclusions. Every case requires a high attention to detail and strong reasoning skills, especially to ensure you’re offering a suitable solution. This means, does the product make sense for your client’s situation? You absolutely have to nail the details!

Prospecting for annuity clients takes knowing how to be a problem solver.

**I followed a mental toughness training platform that transformed the way I think. The book is free and the course is nominal, you should definitely check it out here!

2. Are you skilled at asking questions?

“Of course I am” most agents will tell you. So many agents—and I mean SO many—ask leading questions. They already have an answer in mind and their questions reflect that bias. Our industry has herded agents toward this product-first mentality that is harmful to clients no matter what product is up for discussion.

Learning how to market annuities is more than just a marketing plan, it’s a mentality.

Which of the following two questions would you choose to ask in a retirement planning discussion with a client?

a. “Would you be interested in a product with no cost, no fees and no market risk?”, or

b. “Which type of product would you choose: one with higher risk and a higher return, or one with lower risk and a lower return?”

Which one gives you the best chance of learning what’s really important to a client?

The more you can engage your prospect with thoughtful questions focused on their needs instead of your sales goals, the better chance you have of developing strong rapport and relationships. And, the better chance you have to sell fixed annuities.

3. Are you a talker or a listener?

Annuity specialists and financial advisors are master detectives… they know the right questions (see #2 above) and they listen, not just for the answer but how the answer was given.

They read the room. Is the person nervous? Are they unsure? Are they scared? Are they not on the same page with their spouse? Are they telling the truth?

They listen.

You have two ears and one mouth… you should listen twice as much as you speak.

What is your style and, more importantly, what style do you enjoy?

We have an agent who prefers selling final expense because he says he doesn’t have the patience for the longer sales cycle which many annuities require. And, he’s a talker… make it quick and get on to the next prospect. He has made a wise decision to start selling fixed annuities.

Before you jump into selling fixed annuities do some serious self-analysis to ensure it is the chase for you.

4. Do you have a solid work life balance in your insurance agency?

This has nothing to do with annuities, but everything to do with running a successful insurance agency. Is this you (I found this in a great post on Lifehack)?

Your mail sits unopen for a week and you pay your bills late
You think the more plates you have spinning the more you will have it all
You keep declining invitations from friends
You forget appointments and blow off commitments (like working out, eating healthy)
You don’t care if you’re on track with your plan
You can’t remember what’s in your plan
You don’t answer your phone or you’re always on the phone

You’re on a hamster wheel and can’t get off. If you don’t get this fixed it ultimately won’t matter what you choose to sell.

5. Are you willing to put in the time?

Being great at selling annuities won’t happen because you aced the annuity section on your life insurance exam. Compliance is always changing and it’s vital you commit to the ongoing continuing education associated with annuities. Moreover, new products and options pop up all the time and clients are being bombarded with so many options.

You have to stay current on annuity product training and suitability training.

You can use sources like www.redbirdagents.webce.com and others to sign up for the most current annuity courses as well as access from all the carriers. Remember what I said up front: selling annuities IS NOT as easy as falling off a log.

6. Are you right for fixed annuities?

The coup de grace.

This story isn’t about whether selling fixed annuities are right for you… it’s whether you’re right to begin selling fixed annuities.

Do you get irritated on a life case when you’re having the third conversation (“why can’t they make up their mind… this is a no brainer”)? Selling fixed annuities is a marathon compared to the sprint that can sometimes be life insurance.

An annuity isn’t an expense for the client, it’s a major financial decision. It’s real money they are putting away and, short of a disaster, agreeing to not touch for a long time.

Fixed annuities demand a very broad understanding of a client’s financial situation. While they aren’t registered securities, the questions you must ask to get to the right answer for the client will be eerily similar to those asked by your registered rep friends.

Most of all, selling annuities requires patience.

Now that we have done our best to help you think through if annuity sales are for you, it’s time to dive into what you should know when learning how to sell annuities.

How do I get a license to sell fixed indexed annuities?

License requirements to sell annuities can vary.

License requirements to sell fixed annuities

You need a life insurance license in any state you plan on selling fixed or indexed annuities.

One you’re properly licensed you will then need to complete the product certifications from the annuity companies you represent, and any state-required courses.

How much money can I make selling annuities?

This is a great question and we address this all the time with agents selling indexed annuities.

Annuity commissions are going to vary based on the product type, so it’s hard to actually pinpoint exactly how much you can make selling annuities unless we know exactly what you’re selling. Below is a basic run down of some of the common annuity commission levels based on some of the most common annuity products.

A point to always remember is that commissions can certainly vary in any of these scenarios based on age of your client, product type, and state requirements. Always make sure and check your contracts for updated compensation details.

Fixed Indexed Annuity (FIA commissions)

Fixed indexed annuities are typically going to pay the highest agent commissions.

It’s important to note that fixed indexed annuity commissions are not paid from the customer’s account. FIA commissions are paid from the insurance company. This is a misconception from many clients that the commissions are deducted from the balance of their annuity. That is not the case.

The average street level commission for fixed indexed annuities is 4%-7%.

For example, if you’re client rolls over their $250,000 orphaned 401K from an old employer into a fixed indexed annuity, the commission could be anywhere from $10,000 – $15,000.

Multi Year Guaranteed Annuity (MYGA commissions)

Multi year guaranteed annuities are a great alternative to CD’s. Think about it, “multi year guaranteed annuity”. That means that your clients can put their money into an annuity for multiple years with a guaranteed rate of return.

For example, your client has $100,000 in a CD at the bank earning 2.62%. (national 5 year CD average from Bankrate as of May 2018) They can move it to a multi-year guaranteed annuity (MYGA) which can yield a 25% higher growth compared to the traditional accounts in a banking institution.

Do you think it makes sense to educate your clients on how they can increase their guaranteed returns by 25%?

Average MYGA commissions are 1.5%-2.5%.

Single Premium Immediate Annuity (SPIA commissions)

SPIA is the type of annuity that is used when your client wants to take a lump sum of money and immediately turn it into an income stream they will not outlive.

For example, your client has $300,000 in a 403B from a career in education and is ready to retire and turn on a lifetime income stream. They simply roll the money into the SPIA, and the income begins paying out immediately.

Average SPIA commissions are .5%-3%. Note that SPIA commissions can vary based on the settlement option selected (annuitization method). For example, life only payout vs. 10 year period certain.

How to sell annuities?

The golden question!

How to sell annuities is something we hear all the time, which is why the article started off with the questions to ask yourself to determine if you’re fit to sell annuities.

If you skipped the beginning, I highly suggest going back and taking a look.

Selling annuities is not for the faint of heart. It’s not for the great salesman. It’s not for those who think they can make the sale and never go back to their client.

Selling annuities is about relationships and if you’re not hard-wired to build and maintain relationships, then you shouldn’t consider selling annuities.

Five basic steps to learning how to sell annuities:

Get licensed to sell annuities
Learn annuity basics
Learn how to fact find
Improve your ability to problem solve
Build relationships and service your customers

Factfinding Tips for Selling Annuities

The factfinding process of selling annuities is one of the toughest parts for new agents to learn. It’s important to understand your client’s objectives and you can’t do that unless you’re a seasoned listener.

Here are some tips during your factfinding process:

Always set expectations on the first appointment
Never discuss performance in the first appointment
Ask questions and listen
Listen again, and keep listening
Use a structured fact finder to take notes
Never leave your first appointment without setting your second appointment

Annuities 101

Here are some critical facts you should know about annuities to help you better educate your clients.

Facts about fixed annuities every consumer should know

Safe alternatives without market risk compared to mutual funds, stocks, etc.
Tax deferred growth and/or distribution of retirement savings (not a stock market investment, security or an indexed mutual fund).
Purchasing “Options” protect funds from loss in market is how customers have downside protection with upside potential. More about this below.
Minimum interest guarantees and multiple crediting methods for growth.
Annual ratchet & reset for steady, safe, growth (upside potential with downside protection).
No loss of initial or future contributions, and bonus options.
Lifetime income complies with required minimum distribution (RMD) guidelines.

Difference Between Qualified funds vs. Non-Qualified funds

Best question to ask when selling annuities

One of the best ways I have learned to educate clients on annuities is by asking one simple question.

“Mr. and Mrs. Client, what is most important to you, income now or income later?”

The reason this question is so important during the factfinding process is because it gives you a starting point for case design when you are finished with your first annuity sales appointment.

Understanding your client’s objective of income now or income later is directly correlated to the two common types of annuities.

Income / Immediate Annuities (Income Now)

Annuities designed for distribution are either going to be single premium immediate annuities or fixed indexed annuities with an income rider.

Here’s how the scenario will play out.

You: “What is most important to you, income now or income later?”

Client: “Income now”

You: “Okay, when you say income now, are you referring to income in the next 30-60 days or more along the lines of income in the next year or so?”

Based on how your client answers that question will determine the types of annuities you will want to illustrate for your second appointment.

If they need income in the next 12 months, you’ll likely just work with them on a single premium immediate annuity. It will allow you to take a lump sum and turn it into an income stream virtually immediately.

Growth / Accumulation Annuities (Income Later)

If your client will not need the income for at least one year, consider some type of fixed indexed annuity that offers a lifetime income rider.

Using a lifetime income rider will give your client additional options for taking income vs. having to annuitize like they would with a single premium immediate annuity.

Below is another way to visualize the concept of income now vs. income later.

Below are some annuity sales scenarios that illustrate the “income later” annuity sales concepts.

Now, lets take a look at the “income now” annuity scenario.

We looked at a hypothetical healthcare professional who was retiring soon and needed to turn his savings into an income stream to supplement his social security each month.

Frequently Asked Questions: Selling Annuities

How to sell annuities online?

This is a growing trend as more and more consumers are comfortable making purchases online, especially the younger demographics.

Below are the 6 simple steps to selling annuities online.

Make sure you are well educated on annuities. As I mentioned earlier in this guide, you need to be an expert. Study the market, new products, how they provide solutions to your clients and be prepared to properly educate your clients.
Always problem solve. Treat you clients scenario as a problem you need to solve. This mindset will help you walk them through the various options which are suitable for their situation. Doing this will strengthen your credibility.
Know your competition. Whether it’s another annuity company, a bank, or an investment account, you need to understand your competition so you can properly educate on the strengths of the products you are proposing.
Ask questions. Make sure you are asking thoughtful questions so your clients have the opportunity to begin thinking through all the scenario. Doing this will allow you to listen when your clients tell you exactly what they want or need.
Propose strong solutions. Once you have completed your factfinding you can then begin pulling together annuity illustrations to present. A great software to use when selling annuities online is Zoom. Zoom is a great cloud based communications platform that doesn’t require any special downloads or accounts. It’s extremely easy for your clients to use.
Close the sale and service your client. After the process is completed, you can process your application and start servicing your new client for years to come.

What are required minimum distributions?

Required minimum distributions are required withdrawals from qualified retirement accounts that must occur when the account holder reaches the age of 70½.

For example, your client has a $500,000 IRA and they have never withdrawn any money. Once they hit their 70½ birthday they will be required to start pulling out a percentage of those funds and paying taxes at their current tax rate.

How are required minimum distributions calculated?

RMDs are calculated using a divisor of the balance in the account.

For example, your client has a $500,000 annuity when they turn 71. They would check the current RMD distribution period chart and divide their balance as of Dec 31^st of the prior year by the distribution period of their current age.

$500,000 / 26.5 = $18,867.92 Taxable RMD

Can you aggregate RMD from multiple retirement accounts?

Yes, this can be a great way to maximize tax liability and growth within annuities. This is another reason why it’s so important to fact find correctly when you sell an annuity. You need to understand your clients overall portfolio to best help them manage their distributions down the road.

What does “period certain” mean?

Period certain is a guaranteed time frame an annuity will offer an income stream.

For example, if your client purchased a 10-year period certain immediate annuity for $100,000, they would have 10 years of guaranteed income. If they passed away within the 10 years, their estate would continue to get the income stream until the 10 year period, but not beyond.

However, if the account holder lives past 10 years, the income would continue.

What does “life only” mean for single premium immediate annuities?

Life only payout is a payout option available when annuitizing an annuity, and it’s the typically the payout method which produces the highest level of income.

But, there is a caveat.

The additional risk associated with life only payout is that if the annuitant passes away at any time, the insurance company keeps the remaining funds.

For example, your client turns on a life only income stream from their $400,000 annuity. This pays them $5,000 / month for life. If they pass away in month two, the remainder of the 395,000 goes to the insurance company and not the policyholder’s estate.

Why would you choose life only?

Life only payout is a popular option in wealth transfer scenarios where the income is used to fund a life insurance policy. In that instance, it’s okay if the insurance company takes the remaining funds of the annuity because the beneficiaries receive the proceeds of the life insurance policy tax free.

Another reason and sometimes more common reason people choose life only payout would be if they do not have any family or institution to leave money behind. In these scenarios, the highest income is usually the driving factor for choosing this type of payout solution.

Do I need a securities license to sell fixed & indexed annuities?

As of May 2018, you do not need a securities license to sell fixed or indexed annuities at this time.

How long does it take for a company to transfer funds to an annuity company?

This is a loaded question.

Some companies are very quick and will execute a transfer assuming the agent and client have submitted all the correct forms.

Some companies will drag their feet, giving the internal sales reps a chance to retain the funds.

It’s important that you educate your client on the benefits of an annuity so they aren’t caught off guard during the transfer process with their original company.

How do annuities offer upside potential with downside protection?

This is one of the most common questions clients ask. And, they always say it’s too good to be true.

Yes, indexed annuities can take advantage of market gains with protection from downside market losses. The only two products that offer this type of protection are indexed annuities and indexed life insurance.

This is how it works.

Crediting Market Gains

Insurance companies purchase options for a specific index such as the S&P 500, S&P 500 5% Risk Control TR, Morningstar Dividend Yield Focus Target Volatility 5, and many others with various crediting strategies.

If the index has a positive return, the insurance company executes its options and credits the client their gains according to the crediting strategy selected.

The client’s fund are never directly invested in the market.

Market Loss

If index has a negative return , the options expire and the balance remains locked in until the next positive year.

What happens if the primary annuitant passes away during the surrender period of a fixed indexed annuity?

If the primary annuitant passes away during the surrender period of a fixed indexed annuity, the primary beneficiary commonly has the following options.

Take the lump sum of the accumulation penalty free and roll it into another product.
Keep the policy intact and continue to let it perform (this can change based on whether the beneficiary is a spouse or non-spouse).

What is the difference between the accumulation side and the income rider side of an annuity illustration?

Accumulation side of an annuity is the amount of funds available to the policyholder through cash surrender or withdrawals.

The income rider side is simply illustrated to show a guaranteed level of growth that can only be used if the policyholder turns on the income rider.

Can the income rider side of an annuity be surrendered for cash?

No, the income rider side of an annuity illustration is only used when the income rider is turned on. In some scenarios annuity companies will offer enhanced death benefits which allows the option of a lump sum of the current accumulation value upon death or the income rider payable over a period of time.

As a rule of thumb, income rider values are only used to calculate income benefits and are not associated with contract or surrender values. Always check your company specs to verify.

Conclusion

Just when you think you can’t take any more waffling by the client, there’s more to take.

One of our agents uses Social Security seminars for selling annuities and went more than four months before one of her leads finally converted.

She practiced patience.

Then the flood gates opened and she was prepared like a seasoned vet. She asked herself these questions , studied cases, and put herself in the best possible position to serve her clients.

Every new line of business has a learning curve, some are just a little more detailed than others. Make training and education a priority. Make sure it’s right for you.

We have a great team of insurance and financial producers who are ready to guide you in your journey to selling fixed annuities.