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Call today: 720.344.0312 Recent LTC Articles The Right Tool For The Job Senior Market Advisor Magazine July, 2004 By Wilma G. Anderson Annuities provide a variety of applications and, when presented correctly, a wealth of sales opportunities. At first glance, fixed annuities may seem like a boring investment. But dig deeper and you’ll find that they’re quite exciting – especially in light of a rocky stock market and the rising rates that make them more competitive. Today, slow and steady can be thrilling compared to the alternatives. Annuities are like the Swiss army knife of financial instruments. They can be used in countless situations for clients who want safe income and tax advantages. Needless to say, countless uses give you countless sales opportunities. You’ve got prospects! Before you can sell anyone any annuity, you must have prospects. You can uncover new prospects through public speaking, networking, cross-selling to existing clients, and direct mail. If you’re serious about selling annuities, you should use all of these methods. If you must pick one, however, choose direct mail, which is the most powerful and has the widest reach. Make it the foundation of your annuity marketing program. Annuities are among the best financial products to sell with direct mail. Whereas the emotional long term care insurance sale requires a very sensitive, personal touch, the annuity sale is more straightforward. You’re simply selling a way to make your client’s money work harder while reducing taxes. Mailing large (5” x 8”) postcards is a simple, inexpensive, and effective way to market annuities. Postcards have an advantage over letters, which require the recipient to open them before they make any impression. When a large postcard arrives in the mail, it sticks out because of its size. And, since the message is printed right on the card, it’s guaranteed to be seen. Even if the recipient throws the card away, an image was created in his mind. When that happens, you’ll be winning the first battle: getting a prospect’s attention. Can you repeat that? Before you can send out a mailing, you need a good mailing list. Any competent mailing-list broker can give you a list that meets your requirements for age, annual income, geography, and homeownership. Once you have your list together, send a series of postcards to investors 55 or older in targeted ZIP codes every week. Stagger your mailings so that each prospect will get a new postcard once every two to three months. Repetition is the key to a successful direct mail campaign. One mailing is just not enough and will do you little good. Often, you must send mail to the same person two, three, or more times before you penetrate his armor and get a response. A “drip” postcard campaign is repetitive, like dripping water, and can accomplish this goal. Send a series of large postcards, printed on quality paper to targeted prospects. Not only will you create a message and an image, but you’ll build your response rate as well. Everyone loves freebies, so the postcard should offer a free booklet that answers questions about annuities and tells prospects how to avoid annuity mishaps. Include a toll-free number that recipients can call to request the booklet. It’s best to hire a service – basically a glorified answering machine – to take requests 24/7. Retrieve the requests everyday, and mail the booklets and a cover letter from your office within 24 hours. One week later, call prospects to make sure they received the booklet. The prospect will likely consider this a service call and will, therefore, be less likely to hang up immediately. Ask the prospect if he has a question about one of his current annuities that you can answer while he’s on the phone. And don’t worry; since the prospect called you first to request more information, your follow-up call is legal according to anti-telemarketing laws. The spice of life Direct mail can and should serve as the bedrock of your marketing plan, but consider other opportunities as well, such as stuffers, newspaper ads, and seminars. Be creative and develop approaches that are different from those of other agents in your area. If you plan to include seminars in your prospecting plan, don’t assume you need to invite people to dinner to coax them to attend. Retirees will gladly attend a daytime educational session. In most communities, you can book a room at the local public library at little or no cost. Specific selling opportunities Since annuities are so adaptable, you’ll come across many special situations where they can be applied. For example, many senior clients don’t know what to do with their mandatory IRA distributions, especially if they don’t need the income immediately. Explain that these distributions can be used to fund a periodic-payment annuity. Before making your sales presentation, delve into your client’s financial situation and goals. If he may need the money for the future, point out that the annuity will let him save on a tax-advantaged basis, while providing the benefits of safety and some liquidity through penalty-free withdrawals up to a certain limit. When he needs to tap the money, he may be in a lower tax bracket. If he doesn’t exhaust the annuity, it will go to his beneficiaries. Some clients are so well off that they’ll never need to use their IRA distributions. This is an opportunity for wealth-transfer planning. IRA distributions can be used to buy an annuity for a child, grandchild, or even a niece or nephew. Premiums can be conveniently paid with monthly automatic withdrawals from the client’s checking account. If the owner is a minor, the annuities can be held in a UGMA or UTMA account, giving the donor complete control. Explain to clients the advantages of removing money from their estate and bypassing probate. As much as $11,000 per recipient can be given away without having to file a gift-tax return. So, for instance, a well-heeled grandfather with a dozen adult grandchildren could sock away $11,000 a year in an annuity for each of them. The statements can be sent to him so his grandchildren don’t know they own a valuable annuity (and be tempted to spend it) until his death or until he decides to spill the beans. Divorcees and widows constitute another great market for annuities. Many older women relied on their husbands to handle their finances. Now these newly single women must invest their money wisely. If you’re selling to this type of client, education is key. Provide information that explains annuity features and advantages in layman’s terms. Explain in plain English what an annuity does and how it works. Avoid industry buzzwords that confuse and intimidate clients. Step into your client’s shoes. Would you feel comfortable dealing with an advisor who makes annuities sound like nuclear physics? You’ll also uncover annuity opportunities when selling LTCI. Let’s say you’re dealing with a couple. Mrs. Jones is in good health and qualifies for a policy, but Mr. Jones has had a stroke and can’t be underwritten. Here, an annuity can be used to create a “self-insurance fund” to cover long term care. Point out that the money will grow faster because it’s tax-deferred until withdrawals are made. Also point out that annuities can provide a double tax advantage for retirees receiving Social Security. For example, by reducing the taxable income clients have been receiving from their CDs, annuities also reduce the Social Security tax for people who have been earning amounts exceeding the taxable threshold. On the surface, an annuity may seem like a poor choice to cover long term care because it “locks up” cash. However, annuities are often surprisingly liquid. Some contracts let clients withdraw up to 10 percent each year without penalty, even in the first year. The distribution includes both non-taxable return of principal and taxable earnings. Furthermore, some annuities let the owner withdraw the entire amount penalty free to pay for nursing home care that’s needed for more than 90 days (though not assisted living or home care). Also, a deferred annuity can be annuitized at any time after the year it’s established. For clients who need an immediate cash flow, an immediate annuity is also an option. Overcoming objections Most seniors want to invest in a “sure thing” and balk at annuities because they aren’t FDIC insured. Point out that the “I” in FDIC stands for insurance. So why not buy an annuity from an insurance company? There are many financially strong, A-rated insurers out there, and their rates are just as good or better than those paid by their weaker sisters. There’s no reason not to represent the very best companies. Why give your prospects something to worry about that could kill the sale and come back to haunt you if the insurer runs into trouble? Despite preventive measures, clients are sure to come up with more objections to annuities. The best defense is to come to client meetings prepared to meet some of the most common objections head-on. “I want to think about it.” In this situation, agree with the client that thinking about this decision makes sense. Ask what specifically he needs to think about, and add, “You’re right. I do want you to think about it.” Then point out that it will take time for the insurer to issue the annuity. Explain that the company will deliver the annuity contract to you, and that from the day you deliver that policy, the client will have an additional 15 days to make sure this is the best choice for him. “I need to discuss this with my CPA, attorney, children, palm reader, etc.” If your client feels the need to discuss his decision with someone else, then you must discover why he has not made a decision to buy from you. Offer to meet with the CPA and attorney to answer any questions. It’s a little extra work, but remember that attorneys and CPAs are wonderful sources of referrals. “None of my friends have ever bought this.” Reply by asking your client, “Why do you think they haven’t considered this type of investment?” Usually this objection means that the client is having doubts about you, or his stockbroker wants to sell him something, or his friends want him to use their agent. You must uncover his resistance, so ask the client if he has any particular questions that were not answered. “I’ll just drop dead and let everyone else worry about my money.” This is the client’s way of telling you that he does not believe this decision will affect his long-term financial well-being. It might also mean that you used confusing language he did not understand. Put your pen down, look the client straight in the eye, and say, “Mr. Jones, what is your real concern about annuities?” “I’m going to let my kids take care of this.” Don’t get annoyed with the client who invokes this excuse. Ask if his kids are taking care of his finances now. If not, gently tell the client that you’re sure that he wants to be in control of his investments and make good choices for the future – and that his kids will be proud of good decisions made to protect their financial future. Follow-Up Fodder Here’s an effective script for following up with an annuity prospect after you’ve sent requested product information: You: “Mr. Doe? This is John Jones from ABC Associated Planners. You recently called our office and asked for some information about annuities. I’m just calling to make sure you received the booklet we sent to you.” (This sets the prospect at ease because it seems like a service call instead of a sales call.) Prospect: “Yes, I did. Thank you.” You: “Do you have any particular questions or concerns about your annuities that I can answer on the phone?” This question is disarming because the prospect understands that you’re not trying to get an appointment. Instead, you’re listening. Many prospects will respond with questions that you can answer on the phone. The information you glean from this call will help you determine what kind of situation you’re entering. For example, the prospect who just bought an annuity two months ago and now wants to change it may not be worth pursuing. It’s too soon to make changes and also not appropriate to suggest moving or transferring the money because of surrender charges. Once you have listened to the prospect’s concerns and answered one or two questions about annuities in general, you can determine if it is worth your time to visit him. Sometimes the prospect won’t have any questions or needs. If that’s the case, ask if he is currently working with an advisor to help him make decisions about his financial resources. If not, or if he’s dissatisfied with his current advisor, the door may be open for you to step through. Click here to return to list

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