Over the past year, you've been talking to clients about how tough this economy is, right? We're seeing a combination of economic events unlike anything ever experienced before: recession, stagnation, inflation, overbearing taxes, war, terrorism, oil... the list goes on and on. You know your clients need to take many new risks into consideration when planning for their future.
But the question today is: Have you stopped to think about your own business and how to plan for this uncertain time?
2009 may mark the first time in the history of our industry that demand for fixed and indexed annuities outweighs supply. Think about that for a second. Millions of retired and soon-to-be retired Americans are frightened about their financial futures and want to turn to safety. And for the first time in the history of our industry, supply for the products they demand may not be there. I'm sure you've started to see the writing on the wall already. The bonds that most insurance carriers have on their books are defaulting at record rates. One major carrier I've spoken with said that in 2009, its bond default rate will be nearly 700 percent
of that in a normal year! The 10-year Treasury note, a benchmark for most insurance carriers' bond portfolio, is yielding a record low rate. The volatility index we use to track the cost of most carriers' options (to create the upside of index annuities) is also through the roof. This creates higher option costs and squeezes the insurance carrier even more. Taking this all into consideration explains why the insurance company you're talking to clients about is in a very tough spot.
This "perfect financial storm" places insurance company executives between maintaining their ratings, capital reserves and financial strength, and keeping a competitive product available for your clients. There's a lot more to this story, but even that much information should have you thinking about a new 2009 plan. What will you do to stay on top of all the information and make sure your clients are taken care of throughout the entire year?
Nearly every major indexed annuity carrier has made adjustments to their product portfolio this year. I've been told by more than one major carrier that they cannot take more than 40 percent of the premium they received in 2008 -- they have to turn away 60 percent of the business volume received just last year. You'll continue to see ways that various carriers implement this. Without naming names, some of these adjustments you'll continue to see include:
Stop here for a second and think about this:
- Removing products for sale
- Decreasing caps/rates/bonuses/commissions
- Removing incentive trips or other contests
- Raising minimum premiums to enter a product
- Laying off staff or shutting down offices
Clients are extremely uneasy right now about equity positions in their retirement portfolios. Major market indexes are more volatile today than we've ever seen in the past. It seems as though, every day, a news story about another Ponzi scheme defrauding people of their hard-earned dollars breaks. Banks are paying low yields on their FDIC-insured products. And at the same time, you have a retirement vehicle in fixed and indexed annuities that would be very intriguing to many people, but you may not be able to offer it to them.
What are you going to do about it?
Throw commission out the window. This has nothing to do with commission. This has absolutely everything to do with you taking hold of your business and positioning yourself as the expert in these market conditions. We all know that when times get tough, those not committed to the cause will fall by the wayside. So in tough times, the advisors committed to doing the right thing and taking control of their situations will rise to the top very quickly.
Everything thus far leads me to my recommendation. Spend the next couple days vigilantly evaluating who you're working with. You need to determine if the insurance carriers you're positioning are as committed to your clients as you are. You need to determine if your lead vendors, mailing companies, PR firm, business coach and any other professional colleagues you affiliate with are the absolute best at what they do. You need to scrutinize the marketing organization you work with and ascertain what true value they truly bring to your business and if that can be improved.
2009, more than any other year, will prove to be a time that separates the half-hearted from the superstars of our industry. Those who take time to surround themselves with the right people will own
the marketplace. You can do the easy thing and coast through this year, hoping for it to be a good one. Or, you can spend the time to make yourself better for years to come. I know which of those two options your clients would choose for you.
Happy selling - MJN.