Most of us came in this business hearing the famous selling tip- KISS….keep it simple stupid. This acronym has never been as important as it is in today’s fixed annuity arena. Remember, when we speak of fixed annuities, we are addressing the traditional fixed and the “fixed” index annuities. 

Let’s focus for a minute on the index annuity market. This is a “goofy” market. Have you even seen anything like this in your insurance career? We have products that take most agents 30 minutes to understand. How are we supposed to explain them to a prospect or client in three (3) minutes? 

Please allow me to quote Jack Marrion, President of the Advantage Compendium, “Fixed index annuities can best be described as savings instruments offered by insurance companies that provide a minimum guaranteed return. Insurance companies’ earnings, above and beyond what is needed for this minimum guarantee, are used to purchase an index-link providing the potential for the crediting of excess interest above the minimum guarantee.” 

Sounds pretty simple, doesn’t it? This is even better when you explain to the prospect that their principal and past interest gains are never subject to investment risk. They are backed by the faith and credit of the insurance company. This is safe and this is simple. 

Some might want a simple explanation of the difference between a “fixed rate” annuity and a “fixed index” annuity. Marrion says, “The difference between the two is that with a fixed index annuity, most of the interest paid is used to buy an index-link on an equity index. This gives your client the potential for more interest if the index cooperates.” This sounds pretty simple to me. You do, of course, have the benefit of many fine point of sales pieces along with historical performances of each crediting methodology. So what’s happened? Why all the confusion?

Okay, many companies have made these products difficult to understand ... too many index choices and too many games. Some products have stretched the surrender periods without giving anything back to the client. Don’t get me wrong, long surrender periods are okay if the client gets something in exchange and fully understands what he/she is buying. Some products will never, in my opinion, perform well. Why? They are building in unmanageable commission structures. I like high commissions as well as anyone, but not at the expense of our clients.

• How will we ever be able to go back on an annual review with our clients? 
• How can we look them in the eye? Well, don’t worry, changes are coming! 

Before we analyze potential changes, let’s look at the traditional “fixed annuity.” The traditional, non-index annuity, has been around for quite some time. It has really served a great purpose. People have been able to save money through this vehicle on a tax deferred basis. The last ten (10) years provided our industry with an excellent opportunity for explosive growth. Boy did it ever happen! Bank annuity sales took off; agents were experiencing tremendous increase in incomes and companies’ assets exploded. 

The annuity design was simple. They mimicked CDs. That’s the greatest benchmark for today’s consumer – “is this annuity paying more than my CD?” This is very important because that is the most important factor in your client’s decision to purchase. Tax deferred growth, freedom from probate and an income they can’t outlive is a distant second to “beating” the CD. But things started to get a little cloudy. Let’s take a look.

Companies wanted an increase in market share. They wanted more assets under management. Remember, that’s one of the two (2) biggest factors in which an insurance company makes money. It’s called the spread. It’s the difference between what the company earns in investment income and what they pay your client. The bigger the spread…..the bigger the profit. The other main factor is expense (home office costs and of course, your commissions). So, enter the day of the first year bonus. This “sizzling” first year rate brought in a lot of money. These bonuses have brought about some critics from the press, as well as, disgruntled clients. Why? Renewal rates, in many cases, tanked. These were declared rate annuities that allow the company to “declare” where they set the renewal rates. 

Many companies in search of income reduced your client’s rate to increase the spread. Wall Street liked it….but not the policyholder. I believe that it’s in your best interest, as well as your clients, to purchase a multi-year rate guaranteed annuity if you are not proposing an index annuity. Otherwise, your client is saving in a vehicle with no guarantee of future results. They surely wouldn’t do this with a bank CD. Don’t get me wrong, there are plenty of honorable companies that will treat your client fairly. Also, we do want the company to be profitable. They are our partners. There are many ways to analyze a company to determine how they will renew your client’s rates.

1. Make sure they have plenty of capital and/or strong reinsurers.
   
2. Review their annual statement to see if they are making money.
   
3. Check to see if they have been selling off their portfolio to take investment gains. If they have, the probably reinvested at lower rates which reduce their spread (profit). They may reduce rates to increase that spread.
   
4. Ask to take a look at their past renewals. History is not always an indication of the future, but could prove to be a guide.
   

I have been fortunate to be on both sides of the fence. I’ve been an insurance company president as well as having twenty (20) plus years in the field as an agent, general agent and owner of an insurance marketing organization. So, please excuse me if I tend to over-analyze. But, I am happy to say that the next couple of years will get our annuity industry back on track.

Companies are now designing new products, pulling old products and adhering to new regulatory guidelines. The business is going to be better than ever! The policyholder, the insurance company and the agent will all do well! We are getting back to a level playing field. I, for one, am extremely happy with the direction our industry MUST take if we are going to be able to operate profitably without government intervention. So, what do we do next? Here we go: Sell only what you believe in. Don’t rationalize away parts of the contract you don’t like. Only sell “GOOD STUFF”. Have a concise presentation that provides your prospect or client with all the information they need to make a decision. They buy easier when they understand what you are selling. Don’t over promise. Don’t sell the stock market. This isn’t an investment. 

The fixed index annuity is the most important annuity in the industry. Seniors and Boomers will continue to buy. Our future is bright for multiple sales of annuities and ancillary products - but, only if they are happy with previous purchases. This product is simple and beautiful. Sell it properly and you will profit immensely. The answer is simple. Sell it right and sell what’s good. Good for everyone. We can’t lose. 

Until Next Time ... Good Selling!

Raymond J. Ohlson, CLU
President & CEO of The Ohlson Group and SMP International LLC

I’ve noticed in my thirty plus years of experience in this business that many fail to ask the most important questions of their clients. The data gathering process was an art that was masterfully taught in the early days of the career agent. There were many marketing packages that created vast amounts of insurance and annuity sales but all were based upon a successful and professional question and answer session. 

The concept was simple . . . and still is today. It all boiled down to the fact that . . . the more you know about a prospect and their needs, the greater service performed and the greater the sale. We also found ourselves developing “clients” as opposed to customers. But why do advisors not perfect their “fact finding” skills?

I believe much of our failure in this exercise is due to the fact that we, along with the consumer, live in a world of “instant gratification.” We also tend to follow the leader or propose the concept of the day. Don’t get me wrong, many of our clients have had their assets improved by the simple movement to a product that provides more interest and/or a greater death benefit. But is that what they really wanted their money to do for them? Have they really thought about “How much money do I need . . . and what do I want my money to do for me?” Could this be the re-dawning of a time tested part of the sales cycle? Is there an opportunity to go back to the future? I think so.

Our prospects and clients are inundated with information. They receive most of their information in the form of sound bytes. When many consumers make a purchase they are not completely happy. Oh, they may feel they improved their situation but many times walk away not feeling satisfied. Hence, you have a customer that is open to the approaches of other advisors. This makes it more difficult to obtain repeat sales and quality referrals. We are doomed to spend more time and money going for “one off” sales. 

So, what’s the first step? Allow me to close by suggesting you just ask the following two (2) questions prior to completing the client questionnaire:

1. Mr./Mrs. Prospect, what do you feel that you need regarding your financial affairs and why do you feel you need it?
2. What do you want to do during the balance of your life and how much money do you think you need to accomplish these goals?

Ladies and gentlemen, this will open up free-wheeling discussions regarding their money concerns and goals. Then, after completing the questionnaire, you will be in a much better position to propose solutions for today and plan for tomorrow. We all know that benefits sell better than features. 

When the word gets out that you are truly addressing your clients needs, wants and desires, you will be positioning yourself as the “go to” person in your market. This is just another sub-section of service . . . caring. People want to do business with people that care about them. 

Until next time ... Good Selling!

Raymond J. Ohlson, CLU, CRC
President & CEO
The Ohlson Group & SMP International, LLC

Back by agent demand, please watch one of our most popular agent training videos titled, “Help Your Clients Avoid The Tax Time Bomb”. This video shows you how utilizing Single Premium Life is one of the best ways to transfer your client's wealth to their heirs and beneficiaries in a tax efficient manner.

So, do your clients, and their heirs a favor and  invest 7 minutes to enjoy one of dad's most popular videos. Remember, this guy cut his teeth as a MDRT agent ... and believe us when we say that we heard all about it growing up! And, glad that we did. 

Please watch the 10 Minute Tip Video titled, "Help Your Clients Avoid the Tax Time Bomb." Then please schedule a meeting with us so we can help you sell Single Premium Life. 

"WORKING THE CLOCK" is an important factor in some athletic contests. Football and basketball are, in my opinion, the two sports that really concentrate and excel in this concept. 

We have all seen a football team work a two minute offense when they are behind. They pass to the sidelines so the receiver can get out of bounds and stop the clock. The clock is their enemy because they must “come from behind” to try and win the game. If they are not successful early on they may be forced to “go for broke” and throw the bomb . . . the Hail Mary. Sometimes it works, but for most . . . they just don’t have enough time. The opposite is true if the team with the lead has the ball. They try to run the ball, keep the clock moving, don’t throw an incomplete pass and try to keep the ball away from their opponents because time is on their side.

It’s much the same in the retirement planning business. If you are ahead in the game (retirement planning) you tend to play it safe (Safe Money Places®) but with enough offense (yield) to keep ahead of inflation & taxes and protect your lead (your principal). The opposite is true if a person has not accumulated enough money. The clock is their enemy. They are running out of time and tend to play (invest) in a more risky fashion. They may put a larger percentage of their money in a position to “throw the bomb” (risk money places). 

There is one big difference between a football or basketball game and retirement planning. It’s the clock. In the athletic event we know exactly how much time we have left to win or maintain our advantage. Not so with retirement planning. We never know when the final horn will go off signaling the end of the contest. So we must prepare for multiple overtime sessions.

I believe that we can do a tremendous service for our prospects and clients if we provide them with this, or a similar analogy. They need a playbook to determine the following:

• What is your client's current or projected retirement income?
• Will it be enough if we adjusted to a 3.6% annual inflation rate (the average over the last 25 years)?
• When is a good time to start taking additional retirement income?
• How can we reduce the taxation on their Social Security (the big 15 yard penalty) ?
• Do your clients have savings bonds? Are they aware of the tax time bomb in that product? Do they have an exit strategy?
• Are your clients prepared for potential long term care or home health care needs?

In summary, let’s review our clients’ game plan. Provide annual reviews because nothing remains the same, and Planning continues for as long as the game is on. A “two minute offense” is exciting, however most of our clients are not all Pro Bowl players and don’t have nerves of steel. Planning today is much better than planning tomorrow, next week, next month, or next year.

Today is the best time to start planning. I am confident that they will enjoy the game much more if they are confident in the play calling. 

Until Next Time, Good Selling!

Raymond J. Ohlson, CLU
President and CEO
The Ohlson Group, Inc and SMP International LLC

SERVICE, CREDIBILITY, INTEGRITY and PROFITABILITY (SCIP™ ) are the cornerstones on which I’ve attempted to live my personal and professional life. I utilized these principles as a career agent, general agent, president of a life insurance company and as an owner of an Insurance Marketing Organization (IMO). I believe that adherence to these four (4) words makes our life easier, more enjoyable and much more profitable. I continue to research these words, examine the definitions, apply them to my business and do a “self test” to see if I am truly “putting my money where my mouth is”. But, I find in my talks and writings, that my audience, many times, becomes confused with the definitions. I find that many of us put credibility and integrity in the same camp. Nothing could be further from the truth. Allow me to explain.

Credibility, in its’ simplest definition, is believability, or the ability to “instill” belief in a person, organization or concept. It also leads one to believe that a credible person is dependable. We have many examples of this in our personal lives. An example could be your dry cleaner – “24 hour service…..shirts in by 8AM this morning… back by the next day.” It’s also as simple as people being on time, items delivered as promised. UPS and FedEx are perfect examples of credibility. They deliver as promised. There are many people in our lives that are perceived as credible. Examples can be politicians, business leaders, sales professionals, physicians, men of the cloth and others. But we have seen many examples where we felt betrayed and surprised when one of our “credible” people ended up to be less than “honest”! Business leaders are in jail, some are standing trial, dishonest politicians and possibly friends that were exposed in a less than honest situation. Does that mean that mean that they were not credible? NO, to the contrary, they were credible but the lack of honesty destroyed their believability in an instant. Let’s look at the difference between credibility and integrity.

Integrity is honesty. That’s the difference. A person or organization with integrity always conducts himself in an honest way. They are your perfect partners in your business and personal life. We have all heard about the “snake oil salesmen”. They come into town with credibility. They were believable. They instilled belief. But they sold ointments and elixirs that were bogus. But people bought from them. WHY? They were credible. When the snake oil salesman left town, the people found that the magic potion was worthless. His credibility vanished. WHY? He had no integrity …..no honesty.

A person with integrity is not always credible. I know many honest people that I can’t always depend on. They are not bad. They just forget things, aren’t on time or don’t follow through. But, they are people of integrity. Have I confused you yet? You are probably wondering where I am going with this…… Okay, the perfect recipe is to do business with people and organizations that are full of credibility and integrity. You can depend on these people and you will always know that what they do or say will be honest. The big difference between credibility and integrity is as follows: I believe that you are born with integrity and you fight to keep on the right, or honest side of all endeavors. credibility, on the other hand, is something that you must earn.

It, in some cases, takes years to finally acquire and to be known as the “go to person” …..The dependable one. But, regardless of how long it took to attain that stature, it can all disappear in an instant. It takes a great deal of work and attention to detail to remain credible. It takes following “the Golden Rule” to maintain integrity. So, my final bit of “preaching” would be,

1. Don’t make promises that you can’t keep.
2. Treat people with the same dignity and respect that you would want if the tables were reversed. And finally,
3. Strive to always do what’s right.

Not a fancy business plan, but these are the reasons people do business with us and why people want to be our friends. SERVICE, CREDIBILITY, INTEGRITY and PROFITABILITY (SCIP™) – it’s got to be there for everybody!

Until Next Time ... Good Selling!

Raymond J. Ohlson, CLU, CRC
President and CEO
The Ohlson Group & SMP International LLC