If you're an advisor trying to help more clients with annuities, and you also want to make sure you do it right, then going beyond the basics is important.
I know we all want to make a commission on these contracts, or make clever moves to justify our fees, but a lot of times, if we're not careful, we can end up recommending an annuity that may not be in the best interest of the client.
Here are a few things to know to make sure you're matching the right products with the right people.
Understand the annuities.
There are different types of people, goals, and liquidity. There is no one-size-fits-all with annuities.
When I talk with potential clients, I like to find out as much as I can about them before making a recommendation.
Once I find out what their finances look like, the income they want (if any), and risk tolerance, then my advice usually involves these types of annuities:
- Fixed annuities (especially multi-year-guaranteed annuities).
- Fixed indexed annuities.
If, for example, a client has enough retirement income and is only looking for guaranteed growth that is higher than what they are getting on a bank certificate of deposit or other fixed account, then a high-interest paying MYGA will do.
Suppose a client does not have enough income for retirement from either their pensions, Social Security payments or a combination of both. In that case, a fixed indexed annuity with an income rider might be a better option.
Analyze the client's needs.
How do we get to the best recommendation?
First, provide comprehensive client assessments. Then, focus on transparency and education.
1. Comprehensive Client Assessment
I like to start off by first getting to know the client and find out what they really want.
Are they married? Do they have kids? Is their number one goal income, or do they want to leave a financial legacy behind?
When you meet with your clients, you should be going through a thorough analysis to find out what they have, what they want, and if they have enough to get there.
Part of my job as an advisor is to let people know when they don't have enough and if they need to update some of their retirement goals.
It can be hard to do that, but in my experience, they would rather see you give it to them straight than for you to try to make them feel better.
2. Transparency and Education
The best way to build trust is to educate and provide full disclosure.
I like to tell my clients how much money I am making as well as how it is paid to me.
