Year-end numbers are in and some people, if their money was at risk in the market, may have lost up to 40 percent of their retirement accounts. They are now looking for answers. Many people have expressed a fear of looking at their final yearly account statements. Others say that they must keep their money "in the market" to try and recoup their losses. Still others may not be sure what to do or where to turn, afraid to do anything at all.
Don't be afraid to ask
By asking our clients and prospects tough questions, we can encourage them to think about their options and help them understand what it takes to "recoup their losses." Perhaps they are just looking to protect what they have left in their retirement accounts. People 10 to 15 years away from retirement may have the time to stay in the market, but for those who have less than five years before they stop working or need income, they might need a product that protects their principal and offers them a guaranteed return on their money.
If you've paid attention to recent advertisements, it seems that financial service companies, banks, investment firms and insurance companies are all offering advice for consumers. The products offered are as varied as the spokesperson delivering the message, which ranges from talking babies to famous actors. One of the best lines I've heard gets right to the heart of the matter: "Has the advice from your financial advisor helped you or hurt you this past year?" Wow, what a great question to ask a prospective client. Meanwhile, some producers take it a step further and ask a prospect: "How much did that advice cost you? Not just that 2-percent or 3-percent fee, but the 20 percent to 30 percent in assets you might have lost from your retirement account." That may be the real cost.
Asking tough questions may force people to think about their financial situation. A well-known commercial from the 1980s maintained that "Most people spend more time planning their vacation each year than planning for their retirement." This is so true, even though most people will spend 20 to 25 years in retirement living off their savings. Another tough question for your clients or prospects: "How long did it take you to accumulate the money in your retirement account that you recently lost?" When the client realizes that it may have taken 10 years to save the money they lost in one year, they may take on a completely new perspective of risk. You might also ask, "What is your broker's/financial advisor's plan to help recover your losses?" Don't be surprised if the answer comes back, "Their plan is for me to stay where I am because the market will recover." A very successful insurance professional I work with has asked this question in his seminars over the past four months and found that just asking it has helped generate more than $4 million in new business for his practice. People looking for answers have realized that safety and guarantees never go out of style.
A simple answer
A simple answer for people who want to reposition their money and avoid the risk of losing more is to consider a fixed or fixed indexed annuity with a premium bonus and the guarantees that those products offer your clients. Additionally, income riders have grown in popularity over the last few years. Ask your clients and prospects: "Would you like a product that offers no direct downside market risk, guaranteed rates of return and guaranteed income for life?" You won't be surprised by the answer. Pose that question to the next 10 people you talk to and see what happens.
How much more?
Here's a question to ask those clients on the fence and unable to make a decision, or those who say they must stay in the market to regain their losses: "How much more of your retirement money are you willing to risk to market loss before you make a change?" A big part of helping your clients and prospects decide on where they should have their money is to educate them on the products that are available to them. Explaining the advantages of fixed annuities versus bank CDs is a good place to start.
Many clients may be unaware that fixed annuities offer the advantages of tax deferral and the guaranteed income for life. It may sound overly simple, but a basic chart (shown below) that highlights the advantage of tax deferral throughout a 10- or 20-year period of time has sold more annuities than almost any product I've used.
When clients have all the information in front of them to make a decision, and they fully understand their options, it's amazing how simple the sales process can be. We have a tendency to oversell the products -- all the while explaining the features, benefits and riders -- instead of asking the client, "What is important to you in regard to your retirement money; the money you are going to live off in retirement for the next 20 to 25 years?"
Remember, if you keep asking questions such as this to your prospects, you will encourage them to consider their options and determine whether it would be beneficial for he or she to recoup their losses.
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