Finding Opportunities to Review Your Client’s Asset Allocation

Annuity Reviews and Updates

As a financial professional, you can play a critical role in helping clients understand how to increase their retirement confidence by including annuities in their retirement income plans.?

According to a recent Nationwide annuity survey?of 300 consumers who currently own an annuity, an overwhelming number (84%) said they had turned to their financial professional to learn more about annuities' benefits.[i]

Annuities are a fantastic financial tool that many people hold, and they could be valuable prospects or existing clients for you! If you've already helped some clients with annuity policies, remember your role goes far beyond the initial sale.

A client who selected a variable annuity for its potential growth years ago may have different risk tolerance as they approach retirement. By taking the time to review their portfolio, you can recommend more fitting investment options tailored to their current needs. Let’s explore how to provide the best guidance to ensure they feel secure and prepared for the exciting next chapter in their lives!

If you’re working with clients with an existing annuity, this is a fantastic chance to take a step back and ensure their policy still serves their best interests. Conducting a review not only strengthens relationships but also shows your commitment to their financial well-being, even if it means deciding to keep things as they are.

Remember, the financial landscape has changed dramatically over the past 10 to 15 years. Interest rates are different now, and new features may offer additional benefits unavailable when your clients first purchased their annuity. If they have a Multi-Year Guarantee Annuity (MYGA), staying informed about current rates and renewal opportunities is especially crucial. There may be exciting new options that better align with their unique needs.

For those clients with annuities—whether they’re variable, fixed, indexed, or MYGA—that have been in place for at least three years, it’s time to explore their options. With increasing uncertainties around Social Security and people enjoying longer retirements, it’s your opportunity to help them make the most of their savings so they can thrive throughout their retirement years.

LET'S DIVE INTO 6 EVALUATION STEPS

1. OBJECTIVE: Determine if what the client needs from the policy today is different from when they first purchased the policy
2. INCOME: By reviewing the policy, you may identify potential income options or guarantees that could be beneficial for the client.
3. STRATEGY: By discussing life events since purchase and considering their best interest, you may provide the client with portfolio changes using favorable crediting strategy rates
4. RATES AND FEES: Periodic evaluations allow you the chance to discuss fees and rates and confirm that the original solution remains the best option for the portfolio
5. CHARGES: If a change is considered, you must evaluate a policy’s surrender charges relative to the remaining cumulative fees the client is obligated to pay until the end of the surrender charge period and confirm the change is in the best interest of the policyholder
6. BONUSES: Some carriers count them toward offsetting surrender charges and/or negative MVA, and some don’t

CASE STUDY

In 2015, at age 58, Roy purchased a fixed indexed annuity (FIA) with an income rider to provide income guarantees for himself and his 56-year-old wife, Betty. They anticipated triggering joint life income after a deferral period of roughly ten years.

The policy was intended to provide baseline guarantees for their retirement.

Since purchasing the FIA, their retirement assets performed better than expected, and they no longer need the FIA income during retirement. Instead, they plan to leave the money to their children; however, they want access to the funds in the event of unforeseen circumstances.

The advisor and client considered and reviewed all costs associated with the move in depth. They decided to replace the policy with one issued in today’s more favorable interest rate environment, which is designed more for accumulation than income.

This approach is designed with the clients' best interests in mind, aiming to manage income-rider fees and potentially offer better crediting-strategy rates, with the goal of growing the money for their children.

If, by chance, they encounter a situation that requires accessing the money, there should be more available, with the new contract offering liquidity provisions and waivers to address some of life’s unknowns.

ACKNOWLEDGE AND OVERCOME THE STRUGGLE

Let’s face it—discussing annuities can feel a bit intimidating without a solid strategy. People often prefer what they know and trust, which usually doesn’t include annuities.

It's important to recognize why some financial professionals hesitate to mention them: they fear losing future sales, feel uneasy asking for larger investments, and may have doubts about the product itself.

However, with the right approach and knowledge, you can change that narrative! By fostering open conversations and building confidence, you can help clients understand the potential benefits of annuities and how they may contribute to their future financial security.

Three Strategies to Overcome Common Struggles

1. A Promise: Frame your conversation around the benefits of shifting money into an annuity. This option provides access to a product that has the potential for growth over many years and may offer more cash value than a CD. By demonstrating to your client that they can transfer funds from other sources into a fixed indexed annuity (FIA), they can increase their spendable income in the long run.
2. Prioritize Concerns: Address one of the biggest concerns associated with retirement: "Will I run out of money during retirement?" Annuities are among the few products that provide a lifetime income guarantee, which directly tackles this worry and helps clients feel more comfortable. By discussing how an annuity can potentially help address their concerns about running out of money, you can present this product as a possible option within their financial planning strategy.
3. Genuine Sincerity: Being approachable and likable is one of the easiest ways to encourage clients and prospects to consider new ideas. "Likeability" can depend on various factors, such as your attire, communication style, and demeanor—what resonates will vary for each individual, so pay attention to what works best. Consider starting your conversation with a relatable story to establish rapport.

START WITH WHAT WORRIES CLIENTS THE MOST

Debt in retirement?plays a role in determining optimal financial products. A Harvard study found that over 40% of seniors who were at least 65 years old still had a mortgage.[ii]

Client Comments to Watch For:

• “Our previous financial professional sold us this policy, but we’re unhappy with it.”
• “I don’t like the amount of fees I’m paying on this policy.”
• “We purchased it for income but won’t likely need it.”

Right Questions to Ask:

• “Do you own any annuities currently?”
• “How long ago did you purchase your annuity?”
• “Could we review this policy to help you better understand what you have and how it works?”

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Annuities offer many benefits in retirement, but grabbing attention to move clients into their comfortable decision-making zone is crucial to adding them to a portfolio. The decision becomes more manageable when you have the tools to showcase these benefits.

At InSource, our dedicated technology team is always crafting innovative data solutions specifically for the financial industry, ensuring you have the tools to thrive in an ever-evolving marketplace. Our cohesive software platform allows you to track and analyze all your pending and in-force business and access account values and key milestone dates across various carriers.

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So, why wait? Let’s team up to unlock your annuity opportunities!

[i] https://www.nationwide.com/financial-professionals/blog/planning-guidance/articles/why-professional-guidance-is-so-important-when-clients-buy-annuities

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[ii] https://www.investmentnews.com/retirement-planning/the-shadow-of-debt-is-creeping-further-into-retirement-ebri-says/256128