New Year, New Annuity Options For Your Clients

By Chris Conklin

“New year, new me” is a common phrase heard around the holidays. As New Year’s Eve approaches, we start thinking about the past year and what the future could bring both personally and professionally.

This spirit of improvement is often tied to financial resolutions. Many clients think of the new year as a time to evaluate and expand their financial portfolio, and even more clients are looking for a safe and effective way to protect their money and help it grow. This means you, their trusted advisor, may be asked to help them rethink their financial plans. So what new options are out there? And which ones will lead your clients to financial success in the upcoming year and even into retirement?

A variety of new annuity options are available, helping you to tailor solutions to your clients’ financial goals.

A Focus On Simplicity

Over the past 10 years, the complexity and sophistication of annuity designs increased. Base offerings included numerous riders and confusing options that didn’t necessarily end up serving clients’ needs. Because of this complexity, many clients turned to money market accounts or bonds as their financial vehicles of choice, as they were understandable and protected the principal amount of income while providing modest returns on investment.

However, a resurgence in index annuities reminds us that they are a great choice for clients. These new annuities are easier to sell, as they provide structure for clients in an easy-to-understand package. One big difference with newer products on the market is that they allow clients to reap the benefits of multiple ways of crediting interest, including rate cap, participation rate or fixed interest crediting options.

From a broker perspective, these products are more in tune with clients’ needs, allowing clients to use an annuity as part of a larger financial strategy. For clients who still remember how their portfolios fared during the last market downturn, an annuity can provide them with a safe way to accumulate funds while still providing good upside potential. Here are a few other features to play up in your sales conversations.

The Use Of Well-Known Indices

Sometimes, index annuities are built around little-known or niche indices that can make it hard for your customers to know whether or how much the index is increasing. The last thing you want to do is sell a product your client does not understand.

Index annuities based on common stock market indices — such as the S&P 500 — are popular with customers for a reason: they make sense. Unlike annuities based on exotic indices, these new, straightforward index annuities will make you feel good about helping your client make a sound financial decision that they feel confident about.

In addition to their other popular qualities, index annuities can credit interest based on figures that are widely reported in the financial news, which many clients are familiar with and understand. This, in turn, helps make sales easier, as clients will know how their annuity is performing by keeping up on market trends. This can lead to more trust and understanding in the client/advisor relationship.

 Flexible Surrender Charge Period Options

One of the biggest annuity deterrents is the idea of surrender charge periods. Many clients have had to make difficult decisions regarding surrender charge periods, as the most attractive index annuities tended to have a time frame of 10 years or longer. In addition, it is usually true that to a longer surrender charge period comes with higher cap limits and participation rates as a reward for committing to a substantial period of time.

With the Federal Reserve increasing short-term interest rates, newer index annuities not only have shorter surrender charge periods (such as five or seven years, instead of 10) but also often have similar cap and participation rates to these longer surrender periods. This shift in index annuities has made them a more attractive option for your clients’ financial resolutions for the upcoming year.

Higher Issue Ages

The flexibility of surrender charge periods has also given clients new leeway with issue ages. Previously, clients in their 60s and 70s who put money in an annuity found few options when they reached their 80s. However, five-year surrender charge periods mean certain carriers have increased their issue ages to clients in their upper 80s and even 90s. This gives older clients an alternate option for further interest crediting and, potentially, eventual wealth transfer. This feature opens the door not only for more clients, but for a safer way for clients to protect their wealth.

Feel Good About Selling New Products This New Year

Clients can often be hesitant when considering an unfamiliar product such as an annuity. So, you, as their trusted advisor, should feel good about the product you are encouraging your client to purchase. When you present alternative investment opportunities, be sure to do so in a simple, straightforward way so it not only is easy to understand but also helps your clients feel safe. By suggesting a product that you feel good about offering, you can put your clients on the right financial path to reach their New Year’s goals.

Chris Conklin is vice president of individual annuities at The Standard. He may be contacted at [email protected].

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