The retirement cycle for the 76 million-plus baby boomers has begun. It started Jan. 1, 2006, thus making this a golden time for retirement income planning and the sale of annuities. Never before has our industry had such a captive audience that needs our products and services. However, the research shows that boomers as a group, generally speaking, are not taking the advice of insurance agents or financial advisors. And at the same time, the annuity as a financial planning tool has been under attack in the media.
What can we, as responsible financial service professionals, do to help dispel the negative, often biased, usually technically uninformed, but sometimes accurate press on this very important retirement planning tool? How do we, one by one, start the tipping point action that will help the baby boomers see annuities' value and trust the financial advisor to do the right thing? Following are some ideas.
Q: How can I handle the negative press on annuities?
A: Don't put your head in the sand or use fancy sales techniques to skirt consumer questions -- that's how many of these problems start in the first place. Do your research. Understand what is being said in a certain article or media report. Call, write, or email your company annuity specialist or contact the appropriate industry resources so that you can find out the "why" of the problem at hand and become better informed. The consumer has the right to full disclosure, and it is our responsibility to provide both education and information. Being well informed and having a comfortable understanding of the "why" of attacks on annuity products will fortify your image with your clients and prospects.
Q: What can I do to create a receptive atmosphere for my annuity product presentation?
A: The best time to choose an annuity product for your prospect is after the risk return profile has been completed and reviewed and a full understanding of your potential client's needs has been determined. If you as a well-informed financial professional believe that an annuity is an important and appropriate tool for this specific financial planning situation, then this is the time to find a suitable annuity product that meets your prospects' needs.
When choosing the right annuity product for your potential client, be sure to have a specimen policy sent to you before your presentation so you can read, understand, and know exactly what the contractual stipulations are of the particular contract you will recommend for purchase. Then, at your closing meeting, you will explain the contract to your prospective client, section by section. This process will allow them to see, hear, and comprehend the product features as well as its benefits. In addition, they will understand why you are presenting the chosen annuity as a fit for their retirement plan. This action will provide the much-needed and legally required contract disclosure that is expected in the sale of financial products. This product education will be well received by your potential client, who will then be comfortable signing on the dotted line.
Q: What is a specimen policy?
A: A specimen policy is a copy of an actual annuity contract that may be requested directly from the marketing department of any viable insurance company. If for some reason you speak to someone in the marketing department that does not know what you are talking about, ask for a supervisor. The specimen policies are there, and you have a right to see them in advance of a presentation or sale. Taking this action means that you will need to be certain of what product you are going to present. If you have never thoroughly read an annuity contract cover to cover, you are in for a treat. Your first time through this process will be a memorable experience -- guaranteed.
Q: How do you read a specimen policy?
A: Carefully. Have patience. If this is your first time reading an insurance contract cover to cover, I recommend that you strongly consider the following advice: Plan on blocking out a significant amount of time. Choose a time when you can be certain you will not be interrupted by phones or visitors. Choose a comfortable location. Arm yourself with a good dictionary, a copy of Barron's Dictionary of Insurance Terms, a yellow pad, a pencil and eraser, and a highlighter. It is also important to have the product brochure and any other sales guides provided by the company. Thoroughly read each and every definition, sentence, and paragraph. Review and word-clear the entire contract. (Word-clearing means you look up the definitions of words you don't understand in your two dictionaries at hand.) Jot down on your yellow pad any part of the contract you do not understand, including the crediting methods.
These notes will become the questions you need to ask the insurance company that wrote the contract. Don't be alarmed if the person you speak to in the marketing department does not have the exact explanation and answers to your questions. You must be firm. Do not take a sales-type explanation for an answer. Ask for the supervisor if needed. And be sure to give yourself enough time to thoroughly understand the method used to credit values.
Q: Now what do you do with the information you learned in reviewing the specimen policy?
A: This is the easy part. You have now read and reread the sales brochure, made notes in the specimen policy, and marked where the contract explanations detail what the sales brochure outlines. Now, in your closing presentation it is sometimes a good idea to walk the prospective client through the consumer-approved sales brochure first. When that is complete and there is an acknowledgement of a general understanding, bring out the specimen policy (I guarantee your prospective clients have never seen one of these). In the interest of full disclosure, explain what it is and why you brought it. Walk them through it. Answer questions thoroughly. Be sure to make a notation in their file that you went through this process at the point of sale. This clearly shows respect for your prospective client, compliance to industry standards, and a high level of professionalism.
Q: Why go through all this?
A: For many reasons. Your knowledge and professional standards are vitally important to your clients as well as to the industry in general. In most cases you will be dealing with accumulated savings that have taken your clients a lifetime of hard work and sacrifice to accumulate.
You have a responsibility to be thoroughly knowledgeable about the products you are recommending and to be certain of the appropriateness of those products to serve the client's needs effectively. In addition, this level of knowledge brings added confidence and personal pride in what you do and will benefit you in obtaining good solid referrals. And finally, each and every one of us has a responsibility to maintain the highest ethical standards in our product recommendations.
Melody Juge is a registered representative and managing director of Life Income Management LLC. For more information, visit www.lifeincomemanagement.com.
