Annuity Round Table
September 2, 2011 by John Douglass & Richard Hellerich & Tipton W. Huffman & Ronald J. Lane, Sr. & Sheryl J. Moore
Selling To Boomer Clients
John Douglass & Richard Hellerich & Tipton W. Huffman & Ronald J. Lane, Sr. & Sheryl J. Moore
September 2011 Issue
Q: This year the first baby boomers turn 65 and many are either retired or planning to retire within the next few years. What annuity product advice do you have for brokers when working with boomer clients?
John Douglass: I would like to put a very positive spin on the question of the future of retirement planning and the huge influx of baby boomers now reaching what was to be the classic retirement age of 65. However, I do not think many retirees are hitching up their Airstream trailers and heading out to the open road to enjoy their golden years. That vision has long since disappeared; which means that the need for financial planning today is more crucial than ever with our current financial problems. I think you will find most retirement age couples willing to sit down and talk about ideas and how they can more successfully plan for the future.
Companies have enabled us to help these boomers with some creative products we did not have even a few years ago. The new income riders with guaranteed roll-ups that are available, along with the death benefit riders on indexed plans now entering the market, and critical illness plans all have a valuable need in planning for the future. We all know someone affected by a critical illness. Wealth transfer products, designed to pass on financial security to future generations, have provided brokers with attractive products with which to approach future retirees.
Plus, with life insurance companies no longer providing the incubating system to bring new agents into the field, the number of financial planners is greatly decreasing. Agents who have been in the field for many years have opted for retirement instead of dealing with new product training, anti-money laundering, and developing the technology skills to download materials, emails, etc., due to lack of phone support with many of the insurance companies today.
If agents are willing to meet the challenges of today’s marketplace in the form of technology skills, product training, and developing a savvy marketing sense, they are going to find success. The need for financial planners is growing and the companies are eager to support us with new, creative products. I think our industry has a very bright future meeting the concerns of the baby boomer generation, and who knows? With proper planning, maybe someday they actually can afford to retire. [JD]
Richard Hellerich: More than 10,000 boomers will reach age 65 every single day for the next 19 years, making this the largest annuity marketing segment in history. My advice to brokers is to understand that the sales process with boomers is quite different from the preceding silent, or greatest, generation.
Boomers are generally more educated, affluent and healthier. Many were anticipating a financially secure retirement, but are now dealing with aging parents or adult children dependent on their help, in addition to the current and long term impact of the economic downturn on their nest egg. These pressures, coupled with the desire to have a fulfilling and enjoyable retirement, have made them more receptive to the guarantees and benefits offered by traditional and fixed indexed annuity products.
Boomers prefer to have information presented in terms of categories and options using straightforward facts to help make purchasing decisions. Anticipate that whatever information you present to them at the point of sale will be researched and confirmed. You should also keep this in mind when developing content for your website or marketing materials. Using word-of-mouth communication and referrals from other trusted advisors (attorneys, CPAs, etc.) is also very effective in reaching them.
Pushing a particular carrier/product before the initial fact-finding interview will greatly reduce the chance of a sale. This does not apply to just the boomer market, and I hope this is obvious to all annuity professionals. Boomers are very skeptical of cookie-cutter solutions and expect an advisor to consider the unique aspects of their individual situations.
Here are fixed annuity product benefits appealing to boomers:
• Safety: The principal is protected, which prevents market losses.
• Longevity “insurance”: guaranteed lifetime income with flexibility.
• Estate planning: Once a beneficiary is named, the probate process is typically avoided.
• Liquidity: If needs change, annuities have several liquidity advantages.
• Living benefits: nursing home/long term care.
Fixed and fixed indexed annuities are back in vogue after years of being maligned in the consumer press. Financial editors and reporters have frequently assigned the traits of variable annuity products to fixed annuities, confusing consumers looking for vehicles to protect their retirement assets.
Boomers, still smarting from the market downturn of 2008, are very interested in protection from market downturns and guaranteed payouts for their lifetime. A broker who can help them create personalized and flexible income plans that also provide safety and tax benefits is likely to become the trusted advisor. [RH]
Tip Huffman: Being at the front end of the baby boom generations helps me to understand that brokers working with boomers need to be aware that boomers are fearful about maintaining and growing their retirement funds. They are fearful about having enough income to last through their retirement years. They are fearful about the potential costs of long term care. To be successful, agents need to be able to discuss these fears with their clients and prospects and have rock solid solutions to offer. [TH]
Ron Lane: Being a baby boomer myself, I marvel at the numerous insurance products aimed at my generation. And it’s no wonder; boomers are richer, better educated and more independent-minded than any other generation. They number 76 million strong—with $18 trillion of wealth. However, compared to their parents’ generation, boomers have alarmingly less than adequate retirement plans.
A few years ago we were asked to develop boomer products for carriers which required an exhaustive two-year study of baby boomers’ habits. We found they are not as financially savvy as we expected. Half of all affluent boomers had never consulted a professional advisor, but 75 percent were open to seeking help.
This brings us to some annuity product advice for brokers dealing with boomer clients. I suggest after your initial fact finding, you keep your product recommendations very straightforward. Don’t get caught up in explaining too many different products and their credit movements that influence gains after caps, spreads and participation rates. Heck, some index annuity products still confuse me, and I deal with them every day.
Remember, this age group is at the top of their income producing years. Their homes may be paid for, their children grown and, often, their spouse is employed too. Boomers want to continue their current lifestyles after retirement and will respond to a financial professional who can help them achieve that goal. [RL]
Sheryl Moore: Seven years ago, the boomers’ dilemma bothered me so much that I stayed awake at night trying to solve the problem: How can we get them to move their trillions of dollars that are accumulating into retirement income?
Boomers weren’t being told the retirement income story. Annuitization had existed for many, many years; so why weren’t agents talking about it? Only 2 percent of annuity purchasers were guaranteeing lifetime income via annuitization.
My research revealed that insurance agents didn’t talk about annuitization because (1) they would lose control of their clients’ assets, (2) they would be paid 4 percent street level compensation at best, and (3) clients would lose flexibility in obtaining funds from the assets. It was at this time that I developed the concept of guaranteed lifetime withdrawal benefits (GLWBs) on fixed and indexed annuities. GLWBs had been used on variable annuities as a way to add an element of safety to a “risk money” product. However, using the GLWB on a product that already had principal protection provided an alternative to annuitization on fixed and indexed annuities.
Today, 58 percent of indexed annuity sales have GLWB elected on the contract and 10 percent of these sales are actively taking income out under the GLWB! Retirement income problem solved!
My advice to brokers selling deferred annuities to boomers today is: Don’t forget the retirement income story! Providing a guaranteed income that boomers cannot outlive is paramount in this age of dwindling retirement account balances and ever-extending longevity. The GLWB helps you to tell this story. [SM]
Q: Is there an annuity product or marketing trend with significant potential that you would recommend to a producer?
Moore: I recommend GLWBs on both fixed and indexed annuities for those selling to boomer clients. Yet you need to know that GLWBs come in two varieties: for clients needing income today and for clients needing income tomorrow. Any GLWB that has a bonus that is credited to the benefit base of a GLWB, rather than to the account value of the annuity, performs best when the guaranteed lifetime income is turned on in the first few years of the contract. (These are those annuities advertising 15, 20 and 25 percent bonuses.)
Any GLWB that has a rollup which is credited every year the client defers income performs best when the guaranteed lifetime income is turned on after 7 to 10 years or even longer. (These are those annuities advertising “guaranteed [8 percent] growth every year that the annuitant defers income.”)
If you need help getting started with GLWBs, ask. If you don’t, you’ll be missing the boat with your boomer clients. [SM]
Lane: Because 80 percent of boomers plan to keep working past their normal retirement age, a prudent product would be a flexible premium deferred annuity. There is one we use with a first year premium bonus. The boomer clients can continue to make payments to such an account and when ready to receive a steady income stream, they also receive an additional annuitization bonus.
Young and old boomers have no difficulty in understanding this simple flexible premium, fixed interest annuity. Although these products may offer a lower fixed interest rate, when the bonus interest is added, these products beat the “stuffin’” out of certificates of deposit or money market accounts. There is an A+ rated carrier that has developed such a product and appropriately named it boomer annuity. [RL]
Huffman: We at TWH Agency believe very strongly in two specific product trends that address these fears:
1. Index-linked fixed annuities with guaranteed lifetime income riders. These plans offer rock solid guarantees that give boomers the ability to see their money grow tax-deferred without potential loss and can provide a guaranteed lifetime income benefit base that can produce outstanding lifetime monthly guaranteed income. In addition, many of the newer income riders also offer substantial guaranteed death benefits for those who want to pass assets on to heirs.
2. Linked-benefit life insurance and annuity-based long term care policies which serve multiple purposes. They provide substantial tax-free death benefits as well as long term care coverage. They solve the objection to the question “What happens if I never need to use my LTC coverage?” The answer is “Instead of ending up with a basket of receipts, either your heirs will receive a substantial tax-free death benefit or you can retrieve all or most of your premiums simply by cashing in the policy.”
Without a doubt, sales of these two product lines will be robust for the boomer market in the years ahead. [TH]
Hellerich: Currently, I believe the most significant trend in the fixed annuity market is income planning, Boomers are concerned about the continued viability of Social Security and the economy in general and are more motivated than ever to create their own retirement paychecks. These concerns place fixed indexed annuities with lifetime income benefits in a favorable spotlight.
We have found great success in helping brokers and advisors create income and asset preservation plans tailored to the specific needs of clients and their families. If you listen to your prospects closely during the initial interview as they discuss their lifestyles and family goals, and if you have asked them to have the appropriate financial information available to discuss, your annuity marketing organization should be able to help you meet your client’s particular needs and apply appropriate product solutions to help you become the trusted advisor.
If you can help boomer clients sleep well at night knowing they have ensured their future, they will share your expertise with friends, relatives and associates. There is no better prospect referral than one given to you by an existing client.
Remember, more than 10,000 boomers will reach age 65 every single day for the next 19 years. Brokers who can assist boomer clients in creating guaranteed lifetime income by crafting a plan designed and built to meet unique needs and desires are going to be very busy. [RH]
Douglass: In regard to products, we have had success offering alternatives to low interest rates currently available on money markets and certificates of deposit for more conservative investors. With the ability to ladder these from one to ten years, some very competitive scenarios can be created.
Another product I particularly like is a single premium immediate annuity. The creative planning that can be done with an SPIA is tremendous—and now we have liquidity riders available, which gives us the ability to have return of premium with an SPIA!
People today are looking for flexibility and guarantees. The products today are delivering liquidity with guarantees. The guaranteed liquidity option is available in the life market on term, universal life, second-to-die and, now, on indexed annuities and SPIAs. The ability to rethink decisions and adjust in the future offers tremendous peace of mind and many selling opportunities as you make your clients aware of these flexible new products.
I suggest brokers expand their horizons and look at some of these niche product areas they have perhaps overlooked, particularly products available in the critical illness (extremely popular now, available as a stand-alone policy or rider), guaranteed issue life (for rated clients), wealth transfer (for qualified or non-qualified monies), traditional and indexed annuities—all excellent in covering various planning aspects for future retirees. [JD]
founded Annuities Exchange/Financial Products Corp. 30 years ago. In 1995, the organization introduced indexed annuity products on its newly created website. Leading a national marketing group offering indexed annuities, Douglass is very much aware of pending legislation and brokers’ sentiments in regard to current regulations. He keeps a watchful eye on the marketplace and is very optimistic the equity indexes will continue to be a competitive part of the marketplace, with expanded markets and more consumer friendly products. Douglass can be reached at Annuities Exchange, 2600 North Mayfair Road, Suite 1190, Milwaukee, WI 53226. Telephone: 800-572-7283. Website: www.annuitiesexchange.com.
is the principal of Great Plains Annuity & Life Marketing, Inc., a national wholesaler specializing in the development, marketing and distribution of traditional fixed, fixed indexed annuities, and life insurance products. He founded Great Plains in 2002. Prior to starting Great Plains Annuity & Life Marketing, Hellerich had 16 years experience in the financial services industry, focusing in the early years within the municipal bond markets as a trader and market maker. He spent the last of these eight years with what would become one of the largest annuity and life marketing organizations in the country, focusing on agent recruitment and product development ideas. Hellerich can be reached at Great Plains Annuity & Life Marketing, Inc., 11900 West 87th Street, Suite 115, Lenexa, KS 66215. Email: firstname.lastname@example.org. Website: www.Âgreatplainsannuity.com.
Tipton W. Huffman, CLU, ChFC
In 1993, after 25 years of working in executive sales and marketing positions with three major life insurance companies, Tipton W. Huffman, CLU, ChFC, founded TWH Annuities & Insurance Agency, Inc., for the purpose of providing life insurance, long term care insurance, fixed annuities and related services to independent insurance agents nationwide. He has had numerous articles published in industry trade journals, has served as an Annuity Advisory Council member to insurance companies, and given hundreds of seminars and workshops before the public on subjects covering long term care alternatives and the uses of annuities in retirement planning. Huffman can be reached at TWH Annuities & Insurance Agency, Inc., 6200 East Canyon Rim Road, Suite 203, Anaheim Hills, CA 92807. Telephone: 714-283-9194. Email: email@example.com.
Ronald J. Lane, Sr.
is president of Fairlane Financial Corp. He oversees the company’s day-to-day national operations. His ability to network with carriers has been instrumental in developing new proprietary products for producers. Prior to joining his father, Sam Lane, at Fairlane Financial in 1979, Lane was one of Prudential’s top agents in the United States. Lane can be reached at Fairlane Financial Corp., 1200 South Pine Island Road, Suite 100, Fort Lauderdale, FL 33324. Telephone: 800-327-1460. Email: firstname.lastname@example.org.
Sheryl J. Moore
is president and CEO of AnnuitySpecs.com and LifeSpecs.com, indexed product resources in Des Moines, IA. She has more than a decade of experience working with indexed products and provides competitive intelligence, market research, product development, consulting services and insight to select financial services companies. Moore can be reached at Advantage Group Associates, Inc., 215 Southeast Wildflower Court, Pleasant Hill, IA 50327. Telephone: 515-262-2623. Email: email@example.com.