Annuities sometimes get a bad rap. Clients may hear the word “annuity” and conclude all annuities are the same. Many don’t realize that, not only are there different categories of annuities (fixed, fixed indexed and variable), but there are many different types and designs within each of these categories.
If a client believes annuities aren’t a good fit for them, you may be challenged to engage in a meaningful conversation about what the right annuity can do for them.
An effective approach to overcoming annuity objections is what is known as “dropping the rope.” Think about two people playing tug of war with a rope. When the first person pulls on that rope, what will the other person do? They will pull back. And when they pull back, what will the other do? Pull harder. Back and forth they go - really getting nowhere.
But what if after that first tug of the rope, the other person simply drops the rope? What would happen? The other person would stop pulling, wouldn’t they?
So let’s say an advisor is working with a client and believes an annuity is in that client's best interest. “Linda, looking at your situation, I really think we should look at using an annuity for your retirement planning.”
But Linda immediately says, “Oh no. I don’t want anything to do with an annuity!”
Right there is a critical point where the conversation could potentially go south.
Some advisors might say, “Oh but Linda, many of my clients love their annuities! They can grow tax deferred … they can provide safety … income you cannot outlive …” and on and on. What is that advisor doing at that point? Pulling on the rope!
Instead, the advisor could drop the rope by saying something like: “You know, Linda, there are some annuities I don’t like either. Tell me, what is it about annuities that you don’t like?” And then - and this is important - stop talking. Listen. Listen to what Linda has to say. No salesperson ever listens themselves out of a sale. But trust me, many talk themselves out of a sale because they didn’t know when to stop talking and simply listen!
Linda then responds, “My brother-in-law told me to stay away from annuities because they tie up your money with surrender charges, and when you die, the insurance company keeps the money instead of passing it on to your family!”
You’re now in a stronger position to address the objections. Although it is true that the majority of annuities do have surrender charges, Linda my not realize that there are various liquidity features available, including penalty-free withdrawals and nursing home waivers, and some annuities even have a return-of-premium feature.
Also, in this example, what kind of annuity is Linda describing where the insurance company doesn’t pay out a death claim when the client dies? A life-only single-premium immediate annuity. Life-only SPIAs can be a great fit for the right situation, but they represent a only very small percentage of annuity sales.
Dropping the rope and listening is a great way to help get past that initial hurdle of annuity objections.
However, this selling method is not 100% foolproof. My wife and I were at the hardware store the other day and I was drooling over a table saw I wanted to get for my woodworking shop. She said, “No, we are not buying a table saw.”
I said, “You know Kim, there are some table saws I don’t like either. Tell me, what is it about table saws that you don’t like?”
She said, “The fact that we already own two of them!”
Like I said, it doesn’t work every time!
Jeff Barnes is Regional Vice President, Sales, with EquiTrust. He may be contacted at [email protected].