From the April 2009 Issue of Senior Market Advisor Magazine
This is vindication time for advisor Kelly F. Bills, CSA, CEP. When equity markets were surging, many of his counterparts were busy touting variable annuities for their vast upside potential. Bills, an advisor for National Planning in Salt Lake City, Utah, was singing the praises of VAs for the living benefits that afford contract-holders downside protection. Equity markets have since nosedived, but Bills says he hasn't seen a corresponding drop in his annuity business. The message of safety he had been carrying to prospects and clients prior to the downturn resonates even more now.
"We sure haven't changed our tune" when it comes to marketing and selling variable annuities with living benefits, says Bills. "If anything we are singing it a little bit louder."
the new investor mind-set
Maintaining strong annuity sales in a highly volatile environment requires advisors to cater to a new investor mind-set, where beating the market is secondary to avoiding taking a beating in the market. More than big upside, clients want assurance their assets are protected, which is why traditional fixed annuities and variable annuities with living benefit options are especially popular. Advisors who know how to effectively promote and use these ostensibly safer tools are in a strong position to capitalize on investors' widespread flight to safety.
"If there is a benefit to all that's gone in with the market, it's that people's expectations have come crashing down to earth," says Frances Twiddy, CFP, principal at Frances E. Twiddy Associates in St. Claire Shores, Mich. "It has stopped the impulse to reach for more and more yield."
Skittish clients want annuity products that aren't just safer but simpler as well, she observes. "There's been a very pronounced shift," says Twiddy. "People don't want complex products." That explains the recent surge in fixed annuity sales.
Investors are flocking to plain-vanilla fixed products, if only for several years. "My clients are definitely more receptive to fixed annuities right now. It's a much easier sell," says H. Stephen Bailey, RFC, who heads HB Financial Resources in Charlotte, N.C. "We're moving people out of cash, into a fixed annuity, but we're not going too far out with the annuity–nothing beyond three years–mainly because of the inflation factor."
These days, says Twiddy, it doesn't take much convincing for clients to see the wisdom of putting their money in a fixed annuity that's guaranteed to return 4 percent to 5 percent. The same holds true for variable annuities with living benefits, says Bills. While certainly more complicated than traditional fixed annuities, VAs become much more attractive when they are packaged with some kind of income or withdrawal guarantee feature, he says. "People, especially mutual fund investors, are realizing they're absolutely crazy not to be protecting their money in variable annuities with living benefits."
refocus on referrals
How to get the message about the safety features in fixed and variable annuities out to prospects and clients? Twiddy and Richard W. Stumpf, CFP, principal at Financial Benefits Inc. in Wichita, Kan., say in turbulent times like these, face-to-face contact and personal referrals are the best way to build annuity throughput. "Right now people are scared," says Stumpf. "All they want is to know that their money is safe, and they can't get that piece of mind from a direct mail postcard. They want to hear it specifically from you."
