Does this situation sound familiar? You’ve had a couple of good meetings with a prospect and it looks like they’re ready to work with you and purchase an annuity for their retirement plan. A meeting is scheduled to “seal the deal,” but the night before, the prospect leaves you a voice message saying they’ve “decided to go in a different direction.”
You’re baffled. What could have possibly happened to change their mind? If you were talking to the prospect about a fixed index annuity (FIA), there’s a good chance they got cold feet for one of the following six reasons:
#1: They were listening to background noise.
When it comes to FIAs, there’s a lot of background noise out there — and much of it is critical. This is like the Peanuts cartoons where the parents are talking in the background but all we hear is, “Wah, wah, wah.” Many people have heard or read that FIAs are a “bad” investment, but they can’t articulate why.
To keep prospects from getting cold feet, you need to be proactive and address the background noise head-on in your very first meeting, instead of pretending it’s not there. For example, one of the biggest misconceptions for many people is that if they die soon after investing in an annuity, the insurance company keeps most of their money. Explain that a pure life annuity like this isn’t the kind of annuity you’re recommending.
#2: They don’t want to lock up their money.
It’s true that FIAs limit liquidity, so address this with prospects by acknowledging it before they even bring it up. One way to do this is by pointing out that there’s no such thing as a “free lunch” when it comes to investments. Every investment has tradeoffs and a lack of liquidity is one of the main tradeoffs of an annuity. There are good reasons for this design: The main one is that it allows the insurance company to fulfill the contractual obligations of the annuity — from income to principal protection, upside potential, death benefit and more.
But this doesn’t mean FIAs are completely illiquid, which is what many people think. Explain to prospects that after one year, they can withdraw up to 10% of the annuity’s balance per year for 10 years without paying a surrender charge. Then explain that they can tap other retirement assets that are liquid if they need more cash than this.
#3: They are looking at your competition.
In today’s Internet-driven world, your main competition isn’t other financial advisors — it’s Google. When prospects do an online search for annuities, they’re going to get a grab bag of results, including some very poorly researched articles that don’t accurately explain how annuities work or their benefits. As a result, they may form an opinion about annuities that isn’t accurate.
So you need to be aware of what is being written and said about annuities online. One strategy is to set a Google alert for “annuities” — you’ll get an alert each morning with links to the most recently published online articles about annuities.
As for other competition, much of it is hype-driven, speculative and disingenuous, focusing on past performance and beating market indices. Don’t swim in these waters. Instead of Return on Investment, focus on Reliability of Income. This is the most important type of ROI for retirees and it’s what FIAs help deliver.
#4: They aren’t feeling any pain.
In other words, prospects don’t think there’s anything wrong with their current retirement plan. Maybe this is true … and maybe it isn’t. You can use diagnostic tools like our powerful and simple JourneyGuide software to input client information and do modeling of their future income to show stress points where they might be at risk of running out of money — which is the biggest potential risk for retirees.
#5: There’s a lack of trust.
Let’s face it: Some prospects don’t completely trust a financial advisor if they think they’re being “sold” a financial product. The time to establish trust with prospects is during your very first meeting by asking the right questions and doing more listening than talking.
Your questions should get prospects to think about what they want their lives to look like when they retire. For example, you could ask: “If you fast forwarded to the end of your life and looked back on your retirement years, how would you like these years to look? And what do you need to do now to ensure that this happens?” This will indicate what motivates them when it comes to their retirement priorities. Asking values-based questions will help you identify what matters most to your prospects so you can build trust by helping them meet their goals, not yours.
#6: They’re confused, unsure and unclear about the best way to achieve their retirement goals.
Retirement planning can be confusing and even scary. Some people feel a lot of uncertainty and fear that they aren’t doing it “right” and they might somehow mess everything up. This is completely understandable!
One way to help clear up confusion and ease a prospect’s fear about retirement planning in general and FIAs specifically is to take advantage of our Retirement GPS system. This is a one-page roadmap available to advisors who work with us that you can personalize for prospects with all of their specific information. Like a car GPS, if you don’t enter the right information, prospects will never get to where they want to go, which is a positive retirement outcome.
So why should prospects buy an annuity?
And now, here is the main reason why prospects should buy an annuity: Because there’s a tremendous amount of academic research that shows the value of annuities as a retirement planning tool. According to the research, the likelihood of retirement savings lasting until a person dies goes up significantly when an annuity is integrated into their overall retirement plan.
An annuity is nothing more than a tool. You’re not selling an annuity any more than a carpenter is selling a hammer — instead he’s selling a vision of what a home will look like. Similarly, you’re helping clients get a vision of their financial future in retirement. An annuity can be an effective tool to help them achieve their vision.
Remember: You’re not selling annuities — you’re helping clients enjoy the only retirement they will ever have to the fullest by marrying dollars to dreams.
Give me a call at 404-364-2598 or shoot me an email to talk more about how you can overcome the 6 reasons why people don’t buy annuities, and instead focus on the one reason why they should.