Because placing annuities is not just a transaction, the producer needs to know the how-to's. Here are 5 mistakes that new producers must avoid.
1. Selling tax deferral to someone before seeing their tax return.
First things first, don't just assume that because someone lives in a nice house that they pay a large income tax. Retired people especially can have low expenses, generous Social Security, non-taxable disability benefits, or tax-free municipal bonds, just to start. They're also proud Americans; they know the country costs money to run, money they're happy to pay.
Before you start talking about annuities, ask the client: "Do you feel that you pay too much in taxes?" If the person says yes, ask, "Exactly how much did you pay last year in federal and state combined?" Most will not be able to tell you without pulling out these returns. When that happens, check their overall tax rate on their return. If it's large, point it out to them. If it's small, less than 10% total, then tax-deferral may be a "bad sale." Perhaps move on to life insurance, long term care insurance, or wealth transfer issues.
You would be surprised how many times that question is answered with "we don't pay a lot in income tax."
2. Not asking when the client will need the money.
Many advisors, now that they have a client who is truly interested in tax deferral, don't ask when the client will most likely spend the money. The client might say next year–or never.
If it's next year, will the target plan limit the client to a 10% free withdrawal, even though the person will need 15% of the account value? Maybe the advisor could leave 20% in the bank and move the other 80% into an annuity. That will still go a long way toward solving the tax problem, and it will keep the advisor out of trouble.
If the client says, "I'm never going to touch the money," perhaps life insurance or wealth transfer sales would be a more appropriate sale than an annuity.
3. Not asking the client about his or her beneficiaries.
