Annuities

Don’t let clients settle for inefficiency


Annuities

The first advisor your client is going to call after they’ve been in a personal injury accident is likely their lawyer – not you. Don’t be offended. However, it’s important that you let them know you have the power to help make a big difference in the outcome of their case. 

The average person’s knowledge of structured settlements likely comes from horrible weekday afternoon TV commercials. That’s because most people don’t want to think about being involved in a personal injury, wrongful death, workers’ compensation or other claims case. However, it’s important to understand that these annuitized options can make a significant difference for your clients – whether they’re claimants or defendants.

In addition to the guaranteed payment stream a structured settlement provides, there are several advantages: 

  • For the claimant, payments are exempt from federal and state income taxes
  • For the defendant, the arrangement transfers full responsibility of future payments to an independent third party
  • Structured settlements improve case resolution times – potentially reducing overhead costs and outside legal fees

Don’t worry if you’re not a lawyer or structured settlement expert. Ash Brokerage has a team that can help your clients benefit from this efficient option for their claims case. Call us at 1-800-589-3000. 

 

structure settlement

Sales and customer service


Annuities

For most of my life, my father was an executive with Sears-Roebuck. One of his favorite sayings was, “We are a sales organization; nothing happens until something is sold.” Truer words were never spoken, and if you are a financial advisor, those words resonate loud and clear. 

The process and resulting sale made by a financial advisor is much different than selling a washing machine or a refrigerator. While these sales are transactional in nature, the decision to purchase an annuity or life insurance policy is based by and large on the strength of the relationship between the advisor and the client. 

Regardless, making a sale in our business is imperative to survival. But what happens after the sale might very well distinguish you as an advisor, build and strengthen the relationship, and create easy referrals.

Here are the magic words: customer service. Your clients are craving it! So, how can we offer exceptional customer service?

First, and foremost, make sure you are utilizing annual checkups. These are a perfect opportunity to be front and center and serve. Next, have your client’s favorite drink ready for them, and ask about their family and hobbies. 

Between appointments, reach out to your clients with articles and resources that speak directly to them. This will add to the personal touch. Remember, your client can get information online all day – information directly from someone they trust is different. Send a birthday card or any other card you feel is appropriate. Just remember to write a little note and sign it personally.

These are just ideas to get started. I’m sure there are many more ways to provide great customer service. 

I would agree with my Dad, that nothing happens until something is sold … but great customer service happens after the sale!

 

Retirement for savers AND investors


Annuities

In today's financial environment, what it would take to generate $10,000 in annual income? I see two main consumer categories here: savers and investors.

Savers

The savers aren’t risk takers, and they focus mainly on fixed products. The risk for the saver is the uncertainty of future rates. Looking at the current average rates from bankrate.com, let's see what lump sum would be required to generate $10,000 of annual income. 

Type of strategy

Current interest rate*

Lump sum needed

1-year CD

.26%

$3,846,153

5-year CD

.83%

$1,204,819

5-year annuity

2.30%

$434,783

10-year treasury note

2.34%

$427,350

 

Investors

Now let's look at an investor who may have a combination of fixed, bond and equity investments. Assuming a higher rate of return than the fixed products, the lump sum required for them is even smaller. But even though they need less money up front compared to the savers, investors risk the uncertainty of rate of return and longevity.  

 

Alternatives 

Here are two alternatives that eliminate return and longevity risks AND require smaller lump sums: 

1.  A fixed index annuity with an income rider would need only $181,818 to generate $10,000 a year for a 65-year-old. 

2.  An immediate annuity would take approximately $160,000 to generate $10,000 a year with 10-year term certain for a 65-year-old. 

The income from these solutions would be guaranteed for the rest of the client’s life, regardless of interest rates or how long they live.

 

The Bottom Line: You can secure your clients’ retirement income many different ways. However, both savers and investors can benefit from annuity solutions … and they would potentially save money up front. 

 

*As of Oct. 8, 2014

 

Using the ‘Happily ever after’ close


Annuities

I’ve noticed many times that the difference between an A-level advisor and an A-plus advisor may come down to one simple factor: An A-level advisor gets their client to retirement; an A-plus advisor gets their client to and through retirement! 

Being an A-level advisor is like reading a novel about an incredible journey, then stopping when the travelers get to their destination. An A-plus advisor keeps reading – they want to know what happens to the travelers after they’ve arrived. If you’re selling multi-year guarantee annuities or fixed index annuities with no income riders, you may not be providing your clients with the best ending to their retirement journey story.

While your clients will do better with MYGA rates than they will with bank products, FIAs will historically perform better. If you’re using FIAs already, great! But consider this: At the end of the surrender charge period, what will your clients worlds look like? In five to seven years, will they be less or more conservative? How will market performance over that period (i.e. the inevitable market correction) impact their attitudes?

Five to seven years from now, your clients will be older and closer to or in retirement. Couple that with having gone through a likely market correction, and there’s a good possibility they’ll be more conservative. Most clients assuredly will be more concerned with locking in some degree of retirement income. 

So, where am I going with this?

A select group of FIA income riders are available to increase your clients’ payout percentages the longer they hold the contract before taking income. So by buying the rider now, they can lock in payout percentages that are guaranteed to increase.

For example, a 60-year-old who purchases a rider today could get a guaranteed payout percentage of 7 percent in five years (9 percent in 10 years). If that same 60-year-old waits five years to try and find an income rider, their payout percentage would be around 5 percent (5.5 percent in 10 years), based on current products available.

With higher guaranteed payout percentages purchased today, there’s less pressure on earnings (market correction protection) and greater potential retirement income for clients who will soon be older and possibly more conservative.

The Bottom Line: Purchasing an FIA with an income rider might just provide your clients the “Happily ever after” ending they were hoping for.

 

Annuities and Sports: What I learned from Coach Knight


Annuities

I had the great honor of sitting at the end of the bench as a student manager for Indiana University’s 1987 NCAA Championship basketball team. There are so many great memories associated with the basketball program and my time at IU. As schools kick off their basketball season over the next few weeks with midnight madness events, I typically use the basketball season to reflect on things that I learned from Coach Bob Knight that have made me successful in sales.

Measured Results – Success happens when you understand what works most often and under which circumstances. We kept multiple pages of statistics during routine, mundane practices. We filmed each practice for coaches to review the plays. The coaching staff knew which plays, sets and players performed well against a 2-3 zone, 3-2 zone or man-to-man defense. When it came time to make adjustments during a game, the coaches made intelligent moves instead of guesses. We were “consciously competent” as a program. In sales, we have to make sure that we understand which clients have the greatest need for our products. More importantly, we have to understand their goals and how best to address the obstacles on their way to their goals.  

Willingness to Prepare – One of my favorite and lasting quotes from Coach Knight is, “Everyone has a will to win; few have a will to prepare to win.” During our tournament run, our team didn’t leave the locker room thinking we wouldn’t be coming back as a winner that day. We played Duke, LSU, UNLV, and Syracuse during the tournament. We had the same confidence throughout the season. Players and coaches worked diligently and spent extra time. We felt we had outworked every other team, and we felt we deserved to win. In preparing to meet with a client or prospect, we need to have the same level of confidence that we can help our clients optimize their retirement and protection plans.  

Play to Your Strengths – We all have strengths and weaknesses. Understanding and emphasizing our strengths maximizes our opportunity for success. Coaches taught the recognition of each of the players’ strengths. For example, passing the ball to a 7-foot center near the free throw line was a mistake. Our center would have to take several dribbles to get into his shooting range, and dribbling was not his strength due to his size. That put the center in position to fail. For me, I am not an emotional salesperson. It’s not that I don’t believe in our product – I have a deep commitment to the insurance industry and what it can do for clients. Instead, I’ve looked for clients who purchase on fact, not emotion. I’ve generated the most sales from those prospects making fact-based decisions. I’ve had to play to my strengths.  

Collaborate with Professionals – I remember giving Coach Knight messages that mentors of his were returning his calls. People like Hank Iba (Oklahoma State and U.S. Olympic coach), Pete Newell (California and U.S. Olympic coach), and Everett Dean (Indiana and Stanford coach) were asked to provide input on players, the team and strategy. As an industry, we need to collaborate more with other professionals. When I was in the field, working jointly with people in other specialties allowed me to deliver an entire team approach to my clients. The approach gave my clients the service and expertise they needed to feel confident they would have the financial success of their dreams.  

Win with Integrity – During the four decades Coach Knight was head coach, his teams never had a major violation. When a player might have been involved with illegal recruiting at another program, more often than not Coach eliminated that player from consideration at IU. Winning can be done within the rules. Understanding the rules and how to be successful within the guidelines allows success to happen.  Our industry is full of regulations and rules – increasing every year. We have to find ways to make it easier to conduct business within these new rules and make our clients confident that they are making the right decisions.  

Being part of a winning program led by a Hall of Fame coach provided me the foundation for business success. If our industry used some of the success principles of high-quality sports programs, I think we would perform differently. We would have the innovation like Google and Apple; we would have a focus on getting more people insured instead of protecting our distribution; and financial advisors would prepare their clients for catastrophes of life through the sale of insurance products. In order to change, we must adopt the attitude of preparation, understanding where we have success, playing to our strengths and seeking open collaboration. Let’s make this basketball season a season of change for our business.