Addressing annuity misunderstandings and misgivings, Pt. 2Article added by Ryan Parker on November 13, 2012
Ryan Parker

Ryan Parker

St. Petersburg , FL

Joined: April 04, 2011

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“It really doesn't matter who is elected, we still have a bull's eye on our backs,” Weatherford says. “They need to hear from the industry how many people we insure and why the tax deferrals are a good incentive for people to save.” And in the end, isn't that what we're all trying to do when we sell an annuity?

In Pt. 1 of this series, we focused on the need for annuity agents and advisors to actively engage in efforts to “fix” any misunderstandings clients may have about annuities, as well as on some tips for assuaging any potential misgivings they may have.

We left off with a listing of some of the ideas annuity professionals who responded to the IRI and Cogent survey had for annuity providers in order to make educating clients on the benefits (as well as potential drawbacks) of annuities easier to accomplish, and we'll pick up with tips on how best to position the annuity sale.

Whether the industry will choose to respond to those advisor-generated suggestions remains to be seen, yet there is still more work advisors and agents must do to take the mystery out of these products. But sometimes when annuity salespeople attempt to do just that, the language they use or the way they try and position the product can backfire. The IRI and Cogent research also included a few tips on how best to position an annuity sale, and they're certainly worth your attention.
  • Don't sell from a foundation of fear. Instead, focus on the benefits of creating a source of guaranteed lifetime income. Ferreira advises, “Don't just try to warn them that they could outlive their savings — address it in a way that won't scare them away.

  • Be careful how you position annuity products, as sometimes it all comes down to a name. According to Jason Fichtner, senior research fellow at the Mercatus Center, George Mason University in Fairfax, VA, "Research has shown that when consumers view annuities as consumption to smooth and guaranteed spending, they view annuities as insurance. But when they view it as an investment, they evaluate annuities based on risk and return.” Furthermore, studies indicate that when viewed in the light of consumption, 72 percent of consumers chose to purchase an annuity. Conversely, when consumers view annuities as investments, a mere 21 percent elected to buy an annuity

  • As indicated by earlier IRI research, the advantages of tax-deferral annuities will appeal to many clients who may be concerned with the implications of market volatility combined with Congress's potential to raise taxes to avoid falling off the proverbial cliff . The president and CEO of IRI, Cathy Weatherford, reminds advisors that positioning annuities as great tax-deferral vehicles will appeal to many of your clients.

  • When presenting annuities to clients, many experts, including Fichtner, encourage agents and advisors to incorporate withdrawal rates into online retirement planning calculators. This allows clients to see exactly how much money they would need to have in the future to keep pace with their current spending patterns. This also allows them to see the effects of more unexpected expenses, such as long-term care needs. And as Fichtner maintains, positioning an annuity in this manner can make a guaranteed stream of income look very appealing.
There are still other factors affecting consumers' perception of annuities that advisors and agents can help either to change, improve or explain.

For example, it's important to remember the power of the media when it comes to influencing your clients' perceptions and decisions. According to the survey, 29 percent of non-annuity-owning respondents indicated that the public media has had a negative impact on how they perceive annuities.

“We should not undersell the importance of the media — it's amazing how that creates an echo chamber on how things are marketed,” Fichtner maintains. That's why he encourages annuity professionals to seek out media representatives with whom you can engage in positive discussions about annuities.

Furthermore, the survey's sponsors also encourage annuity professionals to become involved with political policies that may adversely affect annuity sales. A good place to begin your own grassroots campaign is to start writing Congress to implore them not to try and reduce the federal budget deficit by eliminating or otherwise reducing the tax advantages only annuities can offer.

“It really doesn't matter who is elected, we still have a bull's eye on our backs,” Weatherford says. “They need to hear from the industry how many people we insure and why the tax deferrals are a good incentive for people to save.” And in the end, isn't that what we're all trying to do when we sell an annuity?
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