3 Proven Ways To Engage With Clients About Annuities

It’s always good time to look at the current annuity industry landscape, and what financial professionals are considering for their clients. Here are three established methods that can help generate leads to build on. Also worth considering are the asset-based linked benefit long-term care products, to potentially weave into a “while-you’re-at-it” combo sales on repositioning assets.

1. Rising income in retirement

• Position: The U.S. Department of Labor just reported inflation is up 4.2% year over year. Everyone is experiencing these higher costs on normal household goods (food, gasoline, clothing, etc.). Have you asked your clients how concerned they are about inflation impacting purchasing power throughout retirement?
• Potential solution: Several annuity products have an ability to keep pace with inflation with rising income streams. 

Some highly rated carriers offer increasing income based off index return. If the index returns 5%, clients’ income increases 5% in that year.

Example: A client (male, age 65) taking income immediately from a $100,000 annuity might pull only $5,000 annually for 30 years from a standard level income stream, or $150,000 in total.  A rising income stream might start at $4,500 annually at age 65, but increase over 30 years. And assuming a modest 3.15% rate of return each year, a client would net over $400,000 of total/cumulative income over that same 30-year horizon.

2. 401(k) conversation starter

• Position: How often are you reviewing clients’ 401(k) statements with them?  As a new requirement of the SECURE Act, there’s an income projection usually at the bottom of the 401(k) statement. 
• Potential solution: Many financial professionals use that projection to start the simple discussion around “Is this projected amount enough income?” or “How much of that income would you like guaranteed?” Sometimes clients don’t fully understand that the projection of income has certain assumptions and no guarantees on it. This is an ideal starting point for a discussion on using annuities to achieve retirement goals.

Example: A client brings the statement including its income disclosure to an appointment and after reviewing together, the client might indicate a desire to have at least 25% of the income to be guaranteed for life and have no risk of outliving that piece of the retirement plan. That percentage goal gives you a target to start quoting annuities as a solution, potentially generating a sale using an in-service withdrawal from the existing 401(k).

3. Leveraging sidelined/idle assets

• Position: Low-yield asset identification. How many of your clients have certificates of deposit? What are they usually earning on those CDs? 
• Potential solution: In today’s market, we’re typically seeing current one-year CD rates at 0.70% and five-year CD rates around 1.00%.  Financial professionals who speak with clients prior to the client renewing a CD, can reposition the CD funds into a fixed deferred annuity, providing greater returns.

Example: You have a client who is still in the earning years prior to retirement. The client is a conservative investor and typically renews their CD at a local bank or credit union. That CD is paying a one-year rate of .50%. Each year the client is receiving a 1099 for the interest earned, reducing the net after tax rate of return to below the .50% rate. The client should consider a fixed deferred annuity to increase their earnings and net after tax rate. Three-year duration fixed annuities are offering rates as high as 2.1%, which will substantially increase the interest earned, and accomplish interest gains in a tax-deferred manner.

With the evolution of today’s annuity products, financial professionals look at annuity solutions for their clients more frequently today than in the past. It’s important to stay on top of current trends, research appropriate product options, and present solutions that align with clients’ needs.

Start the conversation by looking to understand what your clients’ goals and objectives are, along with their risk tolerance, and concerns about outliving their income. Don’t assume they understand what annuities can offer, as surprisingly few consumers understand how they work. Then you can share the variety of options available to meet the needs and come to a decision together.

Brendan Connerton is director, annuity sales, Crump Life Insurance Services. He may be contacted at [email protected].

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