If you have clients who are feeling confident about their savings and retirement plans right now, chances are they are not really paying attention. Although there are certainly some signs that our economy is starting to get its legs back after the crisis of 2008, we still have a long way to go.
The annuity seems to have fared better than many other financial products during these challenging years. It doesn’t owe that success to any new-fangled bells and whistles added to the products — although there have been some, like the development of annuity/long-term care hybrids. Instead, it’s the old-fashioned security and stability of the annuity that’s kept it relevant. In fact, some would argue that it is times like these that are the reason annuities were built in the first place.
In this producer roundtable, we get a first-hand report on the state of the annuity market from three of the top producers in the business. Sharing their thoughts on why they find the market so compelling, which type of annuity fits which type of prospect, sales approaches that really work and more are the following: Gregory B. Gagne, ChFC; John W. Homer, CLU; and Bobb A. Meckenstock, CLU, M.B.A.
In part one, the panelists discussed getting started in the annuity business. In part two, the importance of tailoring the right annuity solution for each client was detailed. In the final installment, the panelists talk about how to combat the negative press about annuities.
Gregory B. Gagne, ChFC, is the founder and managing member of Affinity Investment Group, an investment advisory firm offering wealth management and distribution planning services for retirees or those planning to retire. Gagne is past president of NAIFA-New Hampshire. He was awarded the Distinguished Financial Advisor of the Year award from NAIFA-New Hampshire in 2008 and is a 13-year qualifier for the Million Dollar Round Table (MDRT), with six Court of the Table and four Top of the Table qualifications.
John W. Homer, CLU, is an independent life insurance consultant who specializes in generational planning. He works on behalf of his clientele and represents them to many different insurance companies in order to obtain the best possible coverage in light of their individual circumstances. He is president of Oxford Financial Group of Salt Lake City. Homer is also a 33-year member of the MDRT and has four Top of the Table and six Court of the Table qualifications.
Bobb A. Meckenstock, CLU, M.B.A., has been the leading annuity salesperson for multiple companies and has also built a substantial book of life insurance clients. Meckenstock has assisted clients in implementing tax-deferred strategies for accumulation and tax-free strategies for distribution. He has sold the “power of tax deferral” idea to thousands of clients over the past34 years, helping them accumulate more than $200 million in deferred assets. Meckenstock is a 32-year MDRT member and has 31 Top of the Table and three Court of the Table qualifications. He has also authored and co-authored several industry manuals and publications on annuity marketing strategies.
How to get beyond the negative press
Charles K. Hirsch: There is a lot of negative press these days from so-called experts in the financial media who warn people away from annuities. How do you counter that negative publicity and get your prospect to really listen to, and seriously consider, what you have to say regarding annuities?
Gregory B. Gagne: Everyone is entitled to his or her opinion. Some of the so-called experts may not even understand the power of an annuity, just that they had heard they were a bad deal so they think they are as well. Is it really a bad idea to have an income source you can’t outlive? People should not put 100 percent of their financial resources into these because of the restrictions involved, but as a portion of a well thought-out plan, they are invaluable. In 2008 into March of 2009, when the market dropped from over 14,000 on the Dow to around 6,500, not one client complained about the annuity check they received, but most were concerned about what might happen to the rest of their portfolio. Annuity accounts are made for times like we are in. Annuities provide a means to mitigate risk while maintaining a steady income.
John W. Homer: In every interview in which we are proposing purchase of a SPIA/life insurance combination, we talk very openly about both the advantages and disadvantages of the products. We discuss loss of liquidity and that they shouldn’t use the strategy with all their liquid assets. And we talk about income and estate tax implications. We also talk about the impact of early death and how our strategy overcomes the otherwise dire consequences. It’s important to let them know that they might not qualify for the good results that others have been able to obtain, and if they don’t, the underwriting results will suggest that this isn’t a good strategy for them. We tell them that the slipper may not fit them.
In other words, instead of waiting for objections, we address them in our proposal interview. There are both pros and cons to every financial strategy, and we emphasize the cons for this strategy. If they think the cons outweigh the pros, they shouldn’t try to make the slipper fit. If the pros outweigh the cons and help them accomplish their objectives, then they might want to see if they can qualify for the strategy.
Bobb A. Meckenstock: I tune out the negative press. Bad information can only be corrected by education. It is up to our leaders in the industry, whether it is an individual or the companies, to take charge and lead. The message should be about providing guaranteed lifetime income in a very uncertain economic world. All of us working together can help re-educate the American public about the need to save for retirement as opposed to spending it all today.
Hirsch: Any further thoughts?
Homer: When applied in the right circumstances, annuities are the only strategies of which I know where people buy large amounts of life insurance and end up with greater cash flow after the purchase than they had before. It is a combination sale of two products, and the sale of the annuity results in the sale of the insurance policy. Instead of using insurance to pay estate taxes, we use it to eliminate estate taxes.
We can say to our clients with estate tax issues, “The IRS gives you a $5 million exemption on estate taxes. How much of your estate would you like to have exempted from estate taxes?”
We can say to our clients who need income, “How much money would you put into a guaranteed account that would pay you the equivalent of a 5 percent CD and would not expire like CDs do?”
Join our panelists for a free live annuity webinar
Panelists Gregory B. Gagne, ChFC, John W. Homer, CLU, and Bobb A. Meckenstock, CLU, M.B.A., have graciously agreed to participate in a free live webinar in March to discuss current trends and opportunities for producers in the annuity market.
You can sign up for the free, one-hour live event by visiting www.LifeHealthPro.com and clicking on “register now” in the Web Seminars section near the bottom of the home page.