One of the biggest problems in selling annuities is explaining it to the consumer. It’s not an easy conversation to have.
It often turns into a long, convoluted lecture that devolves into a bewildering set of choices with words that all need to be defined: fixed, indexed, floors, ceilings, etc. How can you possibly keep a client interested through that?
In most cases, you can’t.
So why don’t we approach this topic differently? What if we took ourselves out of the conversation?
No time to read? Watch our video overview:
Flip the Script
What if we asked consumers to create the ideal financial product to help them during retirement? What kinds of things might they ask for?
“I want guaranteed income every month, like a pension.”
“I don’t want to run out of money if I live until 100.”
“I don’t want to lose any money. Period. I want to get everything out that I put in.”
“I don’t want to lose money when the stock market takes a dive.”
“I don’t want to miss out on gains when the stock market is doing well.”
“If I die before retirement, I want to be able to pass money on to my kids, grandkids, favorite charity, etc.”
“I want access to some or all of that money in case something bad happens.”
Guess what? Your consumer has just described an indexed annuity. How easy would it be to tell them, “Cool – I have something that can do all those things.”
Create a Consumer-Focused Sales Model
Letting your client describe what they want gets them engaged in the discussion. Because it’s all about them, they’re going to be invested from the get-go. They’re more likely to tell you want they want, what they don’t want, and maybe even what they’re afraid of (financially speaking).
Plus, they likely don’t realize there’s already a product that meets most (if not all) of their financial goals. When you tell them that what they want already exists, their attention level is likely to stay high.
This strategy also makes it easier to start the conversation virtually, either on social media or in email marketing. You can use those “I want” statements to create images, posts, videos, and more that catch the consumer’s eye and pique their interest. The “I” statement makes the topic instantly more relatable. Suddenly, this isn’t a conversation full of fine print, as fun as reading the ingredient list on a cereal box. It’s about achieving goals they didn’t know they’d be able to achieve.
What about Fixed Annuities?
Fixed annuity rates average 3.29% today, according to Wink. No wonder they’re hard to sell, right? Well, let’s take a hard look at that 3.29%. What does that compare to right now?
Today's Interest Rates
Best CD rates: 2.25% – 2.70% for up to 2 years, according to Bankrate. But these rates are offered through online banks or online-only offers from chains like Capital One. if you visit your local bank, you’re going to get lower rates. For example, as of this writing, Bank of America’s standard term CD rates are 0.03%–0.75% annual percentage yield (APY), depending on term and balance. Ouch.
Best online savings account rates: 2.00%-2.39%, according to Bankrate. Those percentages are also for online banks or online-only offers. As for local banks, as of this writing, Wells Fargo offers a Platinum Savings account with .05% APY.
U.S. Treasury Bonds: 3.979% as of May 2019, according to TreasuryDirect.
S&P 500 return rate, 1/1/2000 to 12/31/2018: 2.85% annualized return, according to MoneyChimp’s compound annual growth rate calculator. According to this calculator, if you’d started on January 1, 2000 with $1 in the S&P 500, you’d have had $1.71 on December 31, 2018.
Focus on the Present
Compare the rates listed above to the fixed annuity average rate of 3.29%. Suddenly, fixed annuities don’t look so bad…especially when you include the other benefits they provide. When was the last time a CD or savings account provided guaranteed income you couldn’t outlive? When was the last time the stock market came with a minimum guarantee?
A big mistake agents make with annuities is failing to sell them because today’s rates don’t compare to the rates they remember from 10, 20, or even 30 years ago. But times have changed. You can’t buy a Betamax VCR anymore, gas isn’t $1.20 a gallon, and you can’t get an annuity with a 9%-11% fixed interest rate. If you could, just imagine how much your home loan or car loan would be costing you!
In other words, don’t compare today’s situation to what you remember. Just because historical rates were higher doesn’t mean today’s rates are bad.
Our job is to advise our clients about their options and help them choose the best possible course of action they can take right now. Annuities are part of the equation, even with today’s historically low interest rates.
That’s our look at a client-focused way to sell annuities!
What are your best tips and tricks for having a conversation about annuities? How do your clients react to today’s interest rates? Tell us in the comments!