Two thousand years ago, a Jewish carpenter was about to turn the world on its end and asked, "Is anybody listening," because things were really going to change. Forty years ago, Bob Dylan sang "the times they are a changin'". Last year, Barrack Obama won an election by telling people that change was coming. Guess what? Times have changed.
In fact, they've changed dramatically for the financial services community, and especially for the marketing and sales of annuities. Yet, most of the agents who sell the product, including many top producers, are stuck in the old, wild west, and still using a "one-and-done" transactional sales methodology -- one that has created a regulatory storm. Even some of the insurance carriers seem unwilling to embrace the winds of change. They are seemingly either blind to the change or unwilling to meet its demands. It really makes me wonder if anybody is paying attention to the volume of changes in our regulatory environment, our products and our target audience.
Truly, you can't have lived through the last few years in the industry and not been aware of at least three major areas of change. First, the regulatory environment is in the midst of change. Anybody that's not aware of this fact has refused to deal with reality. Though not a reality yet, 151A is just part of the regulatory changes going forward. If you haven't noticed, the former head of FINRA is now the chairwoman of the SEC and is longing to give more power to her old friends. Whether 151A makes it through congressional and legal challenges or not, FINRA will play a significant role in regulating annuities, and probably life insurance in the not too distant future. Even though this regulation hasn't taken effect, it has already affected the suitability requirements that annuity carriers use to accept new business. New forms and new rules come out weekly.
The funny thing is: I hear agents rail against this new regulatory climate with passionate arguments that, frankly, I agree with. But, it doesn't matter. They're asking the wrong question. These agents believe that somehow, being right is going to make a difference when dealing with a monumental government bureaucracy. It's not. They should be asking, "How can my clients I and best profit from these changes?" Let congress and large insurance carriers battle it out. As for the agent, it's time to embrace change and profit from the modification therein. Besides, so many of the changes have been good.
For instance, the regulatory climate has forced annuity carriers to shorten surrender years. I think that's a great thing. I used to sell 10- to 16-year bonus annuities with the best of them, translating into $12 million to $15 million a year. Then, I realized that if I sell a laddered maturity of short-term index annuities, I actually quadrupled my commission and made the client more liquid and able to make use of changes in annuities in the coming years. That's right. I went from an average 8 percent commission to 4 percent commission per case. Yet, I went from $100,000 average premium per case to $250,000 of premium; and another $150,000 of managed money for a total of $400,000 per case -- and growing. My last four cases were between $650,000 and $1,260,000, with 60 percent in annuities. You do the math. Not only do I make more money and have new business opportunities in four years when the annuities start running out of surrenders, I also have managed accounts that build residual income each year. The clients are better off because they have more liquidity, security, and diversity. It is the ultimate win-win situation. Truly, embracing the changes that the regulatory environment has brought can either make you money or make you miserable. But, ultimately it's your choice. Are you listening?
Second, the products we sell have changed dramatically. I have to admit here that the annuity carriers have listened to our cultural changes and developed new shorter-term FIAs that meet the demands of change, but more needs to be done. Many new shorter term FIAs are now on the market, with many features and benefits that make them attractive. There is a plethora of index crediting methods to use. Face it: You don't know what's going to happen over the next five to 10 years, or which crediting method will be the best. Laddering maturities is a great way to diversify index strategies, and there are tons of choices.
Next month, I'll show you how easy it is to create annuity ladders. Just think: If you start a ladder at four years and build your way to 10, you can help the client be more liquid, secure and diversified. And now there are even ladders built starting with a one-year annuity. You get more sales opportunities as the years move on, and even the regulators are happy. Can someone please tell me what's wrong with this picture? (Nothing, of course.)
Third, our target audience of boomers and seniors has become savvier, and more technologically advanced. Are you kidding me? With seniors now the fastest-growing demographic of Internet users and the boomers already buying everything from TVs to cars online, the culture is definitely changing. Get busy on this one because, if you don't, the speed at which this change will pass you up is... well, astronomical, at least. Our target market has more information at their fingertips than ever before, and they're using it. With all the media coverage on cable TV, seniors and boomers are letting the talking heads shape their opinions on financial matters like never before, especially seniors who have more time to listen in their retirement. Online financial blogs, Ed Slott and his IRA onslaught, CNBC, Fox Business News, On The Money, Financial Times, Wall Street Journal, Cavuto, and of course, the infamous Money Talk with Bob "I Hate Annuities" Brinker, are all shaping the views of a very willing audience that actually believe they are being financially educated. I have prospects and clients bringing me information they've gathered off the Internet and other sources regarding investing at least weekly. I now challenge prospects to Google the phrase "index annuity" and prepare them for the onslaught of negativity. I then give them Web sites and articles to read along with that search. You must be proactive in this age -- or lose.
Yet, with all this said, the vast majority of agents are stuck in a transactional sales model instead of choosing to adopt a more successful process-oriented planning approach to their business. Why? Oh, there are plenty of reasons, which range from commission to marginal values to insurance company lethargy to "needs of the moment". Huh? Yeah, "needs of the moment" happens when an agent would like to change, but needs to make a living while learning a new process which puts the new process on the backburner. This is a real problem that can only be solved by a passionate conviction to do the best thing for the client while realizing the obvious long-term advantages to an agent's business.
In the weeks and months to come, I'll be showing not only the many advantages of developing a planning process with laddered maturities of short-term index annuities, but also how to make it happen, including software, products, strategies and more.
With all this change in our regulatory environment, products and target audience, it's a wonder to me that many agents are so hard-headed and unwilling to ask a simple question, "How do I use these changes to help both my clients and my practice to prosper?" and then make adjustments accordingly. It makes me wonder if the companies that design our products are also stuck in the same "salesy" methodology, glamorizing agents who sell "$28 million from their company alone," and don't even consider that one company's products can't possibly provide for all the varied needs of affluent boomers and seniors. We need a wholesale change in our industry, from insurance carriers to FMO's to broker/dealers to agents and brokers. And change is coming. The question you have to ask yourself is: Are you going to change and prosper, or are you going to go out with the high commission long-term annuity dinosaurs.