Annuity myths you must dispel: separating truth from fiction, Pt. 2
February 12, 2013 by Ryan Parker
In the conclusion of this series, we’ll take a look at three more popular annuity myths your clients and prospects could buy into unless you make an open and honest effort to dispel them. Do so effectively, and you’ll always make plenty of annuity sales.
In the first part of this article, we discussed how the media’s representation of annuities has led to rampant misconceptions of this retirement savings and planning vehicle. And with so much bad or simply inaccurate press, certain misunderstandings and myths have affected a great deal of Americans. As you know, every misunderstanding a client or prospect believes is really just another obstacle you must overcome if you intend to demonstrate the real value of annuities and make a good living doing it.
We’ve already explored how you must disabuse your clients of some of the most common myths surrounding annuities, including the notion that they are not products suitable for consumers to purchase from life insurance agents and advisors, that they should be wary of working with anyone who earns a commission, and that annuities are laden with hidden fees and charges. In the conclusion of this series, we’ll take a look at three more popular annuity myths your clients and prospects could buy into unless you make an open and honest effort to dispel them. Do so effectively, and you’ll always make plenty of annuity sales.
If you’re thinking of a fixed annuity, you’ll never beat inflation
If your clients are a bit older than your typical client, and they really can’t afford to lose any of their retirement principal, then a fixed annuity is most likely their best bet. But what if your clients bring up inflation? After all, many securities professionals and pundits have gone on the record stating that without at least some degree of risk exposure, a retirement portfolio based on a fixed annuity won’t be able to stand up against the inflation of the future.
While it’s true that fixed annuity buyers aren’t likely to generate as much upside gains as those with the youth and funding to afford the purchase a fixed indexed or a variable annuity, the point is they’ll have guaranteed income to keep them afloat in retirement. Sure, they might not be able to explore the world or put in that swimming pool, but they won’t have to go to work at McDonald’s at the age of 70, either.
Annuities make it impossible for investors to get to their money for several years
First things first with this one: Remind your clients that annuities are designed to be long-term investments in saving for retirement — they’re not designed to be used prior to the proverbial golden years. If your clients intend to withdraw funds from their annuity prematurely, there will be less opportunity for growth, meaning they might not have as much as they could have if only they had left the annuity intact. However, if this is a persistent concern of prospective buyers, remind them that annuity products do provide various ways for owners to access their funds in the event of an emergency. In fact, according to the Financial Planning Association (FPA), most modern annuities do allow policyholders to withdraw at least a portion of the funds in the annuity each year. As with most longer-term savings vehicles, including 401(k)s and IRAs, there may, of course, be penalties, taxes or fees assessed in the event of early withdrawal. Some annuity providers even require that purchasers wait until a specific waiting period has passed before they’re allowed to access their funds. These measures are not meant to be punitive, however; remind your annuity prospects that many of these rules are in place to protect the client from inadvertently destroying the foundation of their retirement savings.
Many advisors will make inappropriate annuity recommendations just to earn a buck
The fear of unsuitable recommendations is most alive in the fixed indexed annuity arena, although it rears its ugly head in variable and even fixed annuity sales as well. There have been a few bad apples who unscrupulously sold senior citizens annuity products with exclusion periods they’re not likely to survive; but unfortunately, there are bad seeds in nearly ever profession, and there’s always someone out there willing to abandon their conscience in pursuit of the almighty dollar. As an annuity professional, you can remind your clients that determining suitability is one of your foremost priorities, and that you’ve made an ethical commitment to do only good for your clients. Reassure them that if they’re not right for an annuity product, you’ll tell them, and you won’t pull any punches. This is where having some solid credentials, education and strong testimonials from happy clients can really be of benefit in overpowering annuity myths. Your commitment to education and obtaining certificates and designations pertaining to annuities are silent witnesses to your honor; a testimonial on the other hand, speaks right out loud.
In these modern times, when money and planning are discussed more publicly than ever, if your clients have escaped the media’s annuity gaffes entirely, count yourself lucky. The more likely scenario is that you’ll have to combat at least a few annuity myths every time you make a sale. But, the harder you work at heading these objections off at the pass, the stronger your annuity sales will be.
