Annuities: Why Your Client Needs Them and How to Sell Them
Insurance agents want to present their clients with the right products at the right time. That means taking into account a client’s current life stage and goals for the future. For many senior market insurance agents that includes annuities. As an insurance agent, you might already know why investing is important, but you also need to be able to explain to your clients why they should invest. Many clients don’t have the patience to learn about personal finance strategies on their own, that’s why they look to you for advice. By understanding annuities, you can offer an additional product to your client that can help them strengthen their financial goals. Before your next appointment, this is what you need to know about annuities: why your client needs them and how to sell them.
Why Your Client Needs Annuities
Start by understanding how annuities work. Many clients are reluctant to delve deep into financial strategies, and that is particularly true of ones that seem complex like annuities. That is why it is essential as an agent that you know how these products work so you can make the best recommendations to your clients.
Annuities are an important component of the broader retirement plan for many people. The majority of today’s annuities purchasers are in their 50s and 60s. This is the life stage when most gainfully employed individuals are focused on accumulating savings for the future. Clients can use these products to receive money now or accumulate a nest egg for retirement.
Simplistically, annuities can be thought of as a reverse form of life insurance. While life insurance pays the insured upon death, annuities pay annuitants while they are still living. Annuities were originally created by life insurance companies to insure against the risk of outliving one’s income stream. But modern annuity products can also help pay for such things as disability and long-term care. Annuities can also serve as tax shelters for wealthy individuals whose incomes are too high to allow them to save money in other retirement vehicles such as Individual Retirement Accounts.
There are two basic categories of annuities: immediate and deferred. With an immediate annuity the annuitant, the person holding the policy, will begin receiving payments shortly after their initial deposit is made. With a deferred annuity, money that is paid to the insurance carrier is held and accumulates until the annuitant signals that they want to begin making withdrawals.
Within the immediate and deferred categories, there are also two main types of annuities: fixed and variable. A variable annuity is a tax-deferred retirement contract, allowing annuitants to choose from a range of mutual fund investments. The level of income paid is determined by the performance of the investments. A fixed annuity contract obliges the insurance carrier to make a series of fixed payments.This option frequently provides a guaranteed, steady income for the annuitant.
Individuals nearing retirement age who already have a sizeable nest egg may have no intentions of creating an income stream. For these clients, you may want to consider how they’ll want to accumulate if the annuity will be later used for wealth transfer purposes. An individual who knows they will need an income at some point in the future, but not sure when should also stay focused on accumulation.
How to Sell Annuities
Let’s start by mentioning that clients who buy annuities from you will often come back for more. And if their experience with you is good, they will tell other people about you. Annuities are actually one of the simpler financial products, which makes them fairly easy to sell. You could even offer an annuity rate calculator on your website, to help give interested clients a glance at their potential earnings should they buy an annuity. Depending on the annuity’s benefits, your clients could be reducing their income risk.
Just like any product, you will have to put the needs of your client’s first. It is critical that you match people to the right annuity product. When you match your client to the right annuity product, you can offer them a multitude of benefits including triple compounding and tax deferral, guaranteed lifetime income, and a safe and convenient way to transfer wealth to beneficiaries.
After age 59 1/2 annuitants can access cash without any tax penalties. That single benefit makes annuities one of the most flexible retirement plans around. If your client is concerned about transferring wealth to beneficiaries, annuities can help clients avoid the hassle of probate. Not having to worry about the court deciding who should be the beneficiary of your client’s financial legacy could create peace of mind for your client.
To help identify the right product for your clients, there are some questions you can ask. These questions will help you gain insight into your client’s specific time horizon for accessing their money.
- What kind of money do you need in the next five years?
- Do you need income immediately?
- If accumulation is the current goal, will you be OK with years of little or no gain? Or would you prefer a steady competitive gain each year?
For senior market insurance agents that already sell products like life insurance, it will be easy to understand the intricacies of meeting client’s needs. Adding annuities to your sales portfolio boosts your ability to help clients achieve their goals. And finding prospects could be as easy as looking through your book of life insurance clients.
Annuities are the only retirement savings plan that offers unlimited tax-deferral, living and death benefit riders, money management programs, protection from probate and creditors and the option of a guaranteed payout for life. As an insurance agent, when you understand annuities, you can offer your clients an additional product that can help them strengthen their financial goals. Make sure you know why your client needs annuities and how to sell them. We are here ready to help you, come see the full line of products offered by ASPECT Management.
Your success is our mission. Contact ASPECT Management at 866.736.0130 to get started.