With indexed annuities, three strikes and you're not outArticle added by Mike Cajthaml on April 2, 2009

Mike Cajthaml

Leawood, KS

Joined: October 06, 2008

My Company


In my opinion, the best thing a marketing organization can do is help you with ideas that can put money in your pocket. In this brief article, I will share with you part of a presentation I've used with my prospective purchasers.

Always remember that we buy with the emotional side of our brains, so you must design and present your ideas with this in mind. The logical side of our brain does nothing more than confirm our gut feelings, reassuring us that we bought for all the right reasons. Therefore, it is important that we appeal to the client's heart. Be excited about the fact that you can help your client reposition their funds in such a manner that they can now sleep well at night as a result of the safety of fixed indexed annuities. Your enthusiasm is contagious.

There are a number of crediting methodologies out there; some are rather easy to explain and understand and others are not. From a sales standpoint, I like easy. In my experience, if a prospective purchaser gets it, they will more than likely buy it. I also like crediting methods that prove to have a higher likelihood of actually paying off. This makes it much easier at your annual client reviews -- your chances of additional sales are higher with your existing, satisfied customers if you will only ask. (By the way, if you're not doing annual reviews, start doing them.)

Allow me to describe a crediting methodology called the "performance trigger" offered by Lincoln Financial in their OptiPoint® Fixed Indexed Annuity, a product that I particularly like. The insurance carrier declares an interest rate percentage at the beginning of an annual point-to-point term -- let's use a hypothetical 6 percent. The S&P 500® value is then recorded, marking the beginning point to be used for our measurement or comparison. Only one of three things will occur on the annual anniversary date: the S&P 500® will be up, down or flat in relation to the value at the beginning of the term. If it is flat or up (regardless of how far up), your client's account is credited with the 6 percent declared rate. If it is down, then the client gets a zero percentage -- no loss, no gain. It's as simple as that. I found that this concept is easy to understand and easy to explain. You might also want to show an historical chart of the last 20 years of the S&P 500® that illustrates how many times the index was up and how many times it was down.

Once a client knows how this crediting methodology works, here's a simple way you can help them to fully understand its impact. Keep in mind that we are story sellers, and this quick analogy might work as an effective closing technique for those clients who want to bridge the gap between risk and reward.

Start by asking the client if they would allow you to paint a mental picture of just how this idea works. Ask them if they have ever played or watched the game of baseball. Most will say they know it well.

Briefly explain the rule that allows a batter to have three strikes before they are out. In their turn at bat, they might hit a homerun, maybe get a base hit or possibly a walk. Maybe this could be a little like placing your hard-earned assets where they are exposed to the general stock market movements. Your values could go up dramatically (a home run), or down drastically. You may even "strike out!" Would the client like it if we changed the rules and allow them to step up to the plate and never worry about the "three strikes and you're out" concept? How would you like it if you could swing away at every pitch and if you miss and get a strike (i.e., S&P 500® is down during the measuring period), your money does nothing but move sideways, not up or down (no risk of loss). You get ready for another pitch (another annual point-to-point measurement), and this time you get a hit (i.e., the S&P 500® advances when comparing the beginning point to the annual end-point measurement). Your account is now credited with the hypothetical 6 percent declared rate.

The best part is you don't need to hit a homerun to earn the full declared rate. The S&P 500® only needs to be flat or up from its annual beginning point. "So, Mr. and Mrs. Prospective Purchaser, if these were the rules of the game, how long would you stand in that batter's box and "'swing-away?'" All day, I would expect, and your prospective purchaser will feel the same way too.

Give your customers the chance to reposition their assets so they can be in the game and still sleep well at night. This conceptual close sold many fixed indexed annuities for me, and I hope it will for you, too!

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