The Secret To Selling Annuities: Simplicity

Most of us entered this business having heard 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 referring to both traditional fixed and "fixed" index annuities.

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? It gets 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 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. So what’s happened? Why all the confusion?

Many companies have made these products difficult to understand, with too many index choices and too many games. Some products have extended 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 they are buying. Some products will never, in my opinion, perform well. Why? They are building in unmanageable commission structures. I like high commissions as much as anyone, but not at the expense of our clients.

I have been fortunate to be on both sides of the fence. I’ve been an insurance company president as well as having twenty 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.
  
• Have a concise presentation that provides your prospect or client with all the information they need to make a decision.
  
• Don’t overpromise.
  
• 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. It's good for everyone. We can’t lose.