Your professional knowledge of annuities can open the doors to selling other like-minded products, including life insurance and long-term care insurance, but you need to know how to spot the opportunity and service the need. Here are some hints.
Like a chess player who's always thinking several moves ahead or a boxer who's ready with a one-two punch combination, savvy advisors know it pays to be alert to suitable cross-selling opportunities involving annuities.
There are plenty of scenarios where annuities can open doors to other products, such as life insurance, long-term care insurance (both stand-alone policies and add-ons to annuity contracts) and more. The challenge lies in uncovering those opportunities.
For advisors, the process usually starts with asking clients the right questions, according to Bryan C. Bradford, vice president at the Brighton, Mich., office of HBW Insurance & Financial Services, Inc. "Be an investigative reporter," Bradford says. "When you're talking about cross-selling, you have to learn what's important to them."
"First, you find out if the client has money sitting in something like a low-yielding fixed annuity or CD, where it's not doing much," explains William E. Kauffman, Jr., CLU, ChFC, LLIF, director of marketing for life and annuities at Senior Market Sales, an independent marketing organization in Omaha, Neb. "Then you ask one really important question: 'What is the purpose of the money in that account?' That gets the wheels turning and opens up a lot of cross-selling opportunities."
Asking the right questions allows the advisor to "get a foot in the door with clients," adds Peter Donohoe, CFP, CRPS, CDFA, an advisor at PRW Associates in Quincy, Mass. "Then, as you learn more about clients and their assets that's when opportunities for cross-selling become obvious," he says.
Typically, Bradford says, those opportunities come in the form of a problem in need of a solution, such as finding the right instrument to pass assets to heirs tax-efficiently. "Cross-selling is always about solving the client's problem. It's never about selling a product," he says.
Executed properly, the question-and-answer and fact-finding processes should yield cues or red flags that signal a cross-selling opportunity, he explains. The presence of a low-interest-rate account with contents that are earmarked for a purpose, such as wealth transfer, is one such cue.
Though the sale should always be secondary to the solution, cross-selling often leads to a win-win for client and advisor alike. So when opportunities like those detailed below arise, be ready to pounce.
The one-two: Annuity with long-term care insurance
As a wealth-accumulation tool, annuities often need a complement–a wealth-preservation vehicle. A person has a better than one-in-two chance of needing some form of LTC during his or lifetime, points out Pat Sheridan, Kaufman's colleague and director of life sales at SMS. And the cost of care "can ruin just about anybody."
Thus, it's wise to position LTCI as "a way to hedge against that particular loss," Bradford says. "It's a matter of asking the client, 'Whose money do you want to use to lose [to cover the cost of LTC], yours or the insurance company's?'"
