Annuity questions: Provide answers before anyone even asks, Pt. 2Article added by Ryan Parker on May 23, 2012
Ryan Parker

Ryan Parker

St. Petersburg , FL

Joined: April 04, 2011

When you pause to consider the prospect of an annuity sale from your customers' point of view, your education, experience and ethics give you keen insights your client may not yet even realize they need to understand.

In part one of this series, we refreshed and refocused a bit, concentrating on three important annuity questions you might consider posing to your annuity-buying clients to ensure they fully comprehend the features and benefits of the particular annuity they've chosen to purchase.

In part two, we'll continue to ponder some crucial questions so we can offer the answers to our clients before they even have to ask.

What are the fees and/or penalties associated with cashing in or early surrender?

As you're well aware, most annuity companies allow for some degree of withdrawal — typically somewhere between 5 percent and 15 percent of the initial investment — before your client is required to pay a surrender penalty or fee. But there's a big difference between 5 percent and 15 percent, and each company has its own policy regarding early withdrawals, so over-inform your client about the fees associated with their annuity product.

Precisely how much is their annual withdrawal fee? Can that fee ever get higher? What happens in the event of an emergency when they want to withdraw more funds? Leave no stone unturned!

How much will this annuity cost each year?

Reinforce to your client that since annuities offer more guarantees than mutual funds, they tend to be slightly more expensive than their investment counterparts. And naturally, their cost also is closely tied to how many bells and whistles the client wants or needs.

Disclose all costs, such as the annuity's administrative fee, as well as any mortality and expense fees associated with the death benefit structure, and explain what those fees cover and entail. If your client has chosen to add any income- or death-related benefits, such as guaranteed minimum returns, sustainable lifetime withdrawals, a higher death benefit, etc., carefully outline what each extra benefit costs, and what they get in return.

How am I compensated for my services?

And while this certainly goes without saying, the manner in which you're compensated for making an annuity sale should be abundantly clear to your clients. Granted, this will vary based on your company, practice, personal preference and even the type of annuity you're selling. If you work on a commission-based structure, inform them of your cut; clients always appreciate upfront honesty in this particular aspect of your job.
If you're selling a variable annuity, you'll naturally want to disclose the nature of your asset management fees, including whether they're considered direct or indirect fees. Your client will want to know precisely what this fee buys them, so be prepared to offer explanations as to the time you'll devote to their money, how you plan to invest it, how much say they have in selecting the sub-accounts, how often they can change their investment allocations, etc. These are more complicated annuities, and your client deserves the education commensurate with the product they're purchasing.


This list of questions, as you well know, is by no means exhaustive — the fact is, you know better than anyone which questions need to be explored and answered. When you pause to consider the prospect of an annuity sale from your customers' point of view, your education, experience and ethics give you keen insights your client may not yet even realize they need to understand.

This is your client's nest egg, so don't be shy about doing everything you can to ensure they know just how their annuity will protect it, including asking as many questions as you need to in order to be certain they understand exactly what they're getting into and what they can expect to get out of it. You’ll fast become recognized and appreciated for your upfront and thorough nature, which will certainly be reflected in your growing list of referrals.

Use this questioning technique to your advantage (and be sure to maintain documentation of your efforts), and assure that all parties involved understand every detail of the annuity transaction.
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