Don’t let Google be your clients’ financial advisor

Opinion

Google it? Not when it comes to financial advice. AP Photo/Mark Lennihan, file Google it? Not when it comes to financial advice. AP Photo/Mark Lennihan, file

We have all heard that the last place we should look for medical information is on the Internet. Everyone has a story about some friend who found a freckle on their back, took to the Internet, and soon had themselves convinced they had just days to live. We go to doctors for a reason: They are experts in their field.

Financial advisors often find themselves in a similar position. You are also experts in your field, which is why people come to you. But the truth is that many of those same people are searching for information on their own as well. Many of your clients have Googled their financial freckles and have come to some pretty startling conclusions about their investment plans.

One of the biggest casualties of this independent research: annuities. Whether it be from media sources, traditional mindsets or just plain bogus ideas, there is an incredible number of myths running rampant in the mind of your clients. It can be hard when people walk into your office with a diagnosis in mind to convince them that annuities can be a perfectly healthy investment.

The question is: How do you overcome these barriers? How can you shed some light on the dark reputation that many people have associated with annuities? The first step is to identify these four Internet distortions.

  1. “If I buy an annuity, I will lose control of my money.” When most people think about buying an annuity, they picture themselves handing over their money, never to see it again. Of course, these types of inflexible annuities do still exist, but they are not the only (and certainly not the most common) forms of annuities available today, as you well know. This is something that you clients need to know as well.
  2.  “Annuities aren’t tax efficient.” This misconception is popular because gains from annuities are taxed at higher income rates than the lower capital gains rates that most other investments receive. You can easily show clients the beauty of the progressive tax system, that the payments are often taxed at a much lower effective tax rates rather than the perceived marginal tax rate.
  3.  “That percentage of interest on my annuity is not possible.” Annuities often get hit with the “It sounds too good to be true” notion. When clients hear about the possibility of earning double-digit interest on an investment, they either turn around or frantically search for the fine print. Case studies, an honest discussion and simple math are the greatest ways to counteract this.
  4. “Annuities are sold by salespeople motivated by high commissions.” This is often the most difficult myth to overcome because it’s not a concern that your clients will mention to you. Unfortunately, the hardest questions to answer are the ones that the client never asks. It’s critical for advisors to show the client the benefits they will be gaining, and explain how an annuity can be valuable to them. People often care less about how good it is for you if it’s good for them as well.

The important thing is to not shy away from these barriers. Many of the mountains holding these people back from annuities are simply glorified mole hills. It’s your job to clear up these misconceptions and make sure your clients are getting the right information from the right source.

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About the Author
Ryan Parker

Ryan Parker

Ryan Parker is vice president and general manager at Bankers Annuity Brokerage.

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