Annuities

Let's compare income values


Annuities

I talk to many advisors who simply sell the guaranteed income rider increases on fixed-indexed annuities and variable annuities. That alone creates confusion, as I routinely talk to clients who think they are earning 6 percent or 7 percent on their initial investments. Whether the annuity is being mis-sold or misunderstood remains a topic for another time. What is important is how much leverage the client can create for the assets being deployed for income purposes.

When LIMRA released its fourth quarter industry statistics recently, deferred income annuities rose to the fastest growing segment of the annuity market place. It's easy to understand when you look at the alternatives associated with income riders, especially those that bear market risks. For example, we placed $500,000 in a deferred annuity for a 55-year-old male. The client deferred income for 20 years (to age 75) and began taking a life with installment refund income option. The annuity produced a $9,015 income for life with a refund of unused premium. Assuming a 5 percent payout factor on an income rider at age 75 with a maxed out income rider, the client would have had to grown an income rider value equal to $1,620,000. I am not aware of an income rider that will generate more than three times the initial premium — guaranteed.

It's time to turn the conversation to income, leverage and tax efficiency — not false guarantees of paper value. Our clients need solutions to their biggest fear — outliving their income. Call Ash Brokerage for details on how a deferred income annuity may fit into your clients' retirement income plans.

Beating resistance


Annuities

I attended the Society of Financial Service Professionals Leadership Development Conference in early March. If you are a credentialed professional and have not looked at this organization, please do so. It is our industry's best-kept secret for professional growth and ethical accountability among peers. I enjoy spending time with advisors who have a common goal of seeking knowledge, building relationships and maintaining client interests above their own.

Most seasoned advisors experience resistance with clients and collaborative partnerships due to the complexity of client solutions. I was re-introduced to Gleicher's Formula for overcoming resistance:

D x V x F > R

D = Dissatisfaction about the current situation
V = Vision of how things could be in the future
F = First steps necessary to change the outcome
R = Resistance

This formula explains how to persuade anyone — including ourselves — to change behavior. Getting people to act is one of the most difficult things to accomplish in any sales or leadership role. However, by understanding the depth of a person's problem, we create urgency. The vision of how the problem can go away increases the likelihood for change exponentially. Even if the person doesn't perceive a problem exists, a clear vision of success may motivate change. But if clear first steps are not demonstrated, the formula does not produce enough value to overcome the resistance to change. Think of the first steps as a zero in the equation. Anything times anything times zero equals zero.

If you are looking to beat resistance, either external or internal, evaluate the severity of letting the current behavior continue against how much better the situation improves by the change. But most importantly, focus on the first step. It energizes change. Resistance will always be greater without action. If you are unsure what actions you need to create change in your business, call Ash Brokerage to determine how we can help move forward with you.

Don't blame the product - work harder!


Annuities

"Don't wish it were easier; wish you were better." 
 — Jim Rohn 


Prior to the 2014 Winter Olympics, the United States was favored to win several speed skating medals at Sochi. Shani Davis had won two previous gold medals at previous Olympic Games and was expected to win again. The United States medaled in every games for the past 30 years, since the Sarajevo games. Success seemed certain to some degree. 

The U.S. team began wearing “state-of-the-art" speed skating suits to provide an even more prolific advantage over the competition. To everyone's surprise, the Americans lost every skating event during the first week and won zero medals. An exception was granted to switch back to their old uniforms, but the results did not change. For the first time in 30 years, the U.S. speed skating team was shut out of any medals during the Olympic Games. A spotlight was placed on the uniform. It seems like the team members were hoping for the suits to make things easier; instead they were wishing they were more prepared. 

Sales is one of the most difficult professions due to the rejection, need for continual knowledge, and focus on ever-changing prospects. We all wish things would be different when we struggle in our sales. We spend a considerable amount of time, money and energy searching for the silver bullet. However, we need to concentrate on getting better. Just like a change in uniform didn't make the U.S. speed skating team better, a new product or lead system doesn't make your job easier. It takes hard work, new ideas, and commitment to the industry. Are you with the right partner to grow your business? Ash Brokerage provides more than 225 combined years of sales experience, brand marketing expertise, operational efficiency, and value-based leadership to your office. Are you ready to get better?

Taking retirement across the goal line


Annuities

Statistically in the NFL, teams score most during the final two minutes of each half. It's called the two-minute drill. In order to be considered a great quarterback, you must precisely orchestrate those minutes in close games. Doing so is the difference between winning and losing many games. There seems to be less stress around the team when a quarterback runs the two-minute drill to perfection, and there is a clear path to late game success. 

In retirement planning, it's important to be the same type of quarterback or planner for our clients. The late game heroics are what separate the trusted advisor from the everyday planner. Clients obsess over how their later retirement years will look. It's not just the year the client runs out of money that is stressful; it is the years leading up to that point which force lifestyle changes and emotional pain within families. Clients need to know plans are in place to have a long, successful retirement.

Lifetime income products provide a level of certainty. Control and access are built into newly designed products. By positioning some products to begin income at life expectancy calculations, you can leverage a client's mortality credits and supply them with a higher income level during their own two-minute drills. By creating confidence in the late game, advisors gain trust with clients. Rethinking conventional products in an unconventional manner proves to be the difference in many situations.

The domino effect


Annuities

Traveling in the Midwest these past few weeks has been less than easy. I almost thought John Candy and Steve Martin were following me through my planes, trains and automobiles. At the gate, I decided to leave the airport, thinking my first flight would not catch the connecting flight. However, as I stepped away from the gate, the flight began boarding and I made a last-minute decision to get on the plane. As feared, I missed my flight to Buffalo, New York; instead, the airline shipped me to my next day's appointment in Milwaukee and, after my flight from Milwaukee was cancelled, I ended up driving five hours to get home. It seemed as though the first flight set off a chain of events that resonated throughout the rest of my trip. In retirement planning, we call this sequencing of returns. 

Having several bad investment performance years over a 30-year retirement cycle is usually not a deal breaker. However, if those negative years occur at the beginning of retirement, the consequences can linger. So, many times, advisors use an analysis with an average return. If you take the average and place the best years first and/or the worst years first, the account value hits zero in a range of 13-years difference. It's important to take the risk of a poor sequence of returns out of your clients' equation, especially early in the retirement years. 

If I had this week's travel to do over, I certainly would have continued walking away from the gate. Make sure your clients walk away from the gate of potential pitfalls and unknowns. By placing part of your clients' portfolio in a guaranteed growth and guaranteed income stream, you help eliminate the initial sequence of returns. By eliminating that first potential downfall, you have positively impacted the chances of your client having a successful retirement.