by Chris Conroy JD, MBA, Vice President of Advanced Marketing
Are you looking for a new way to explain what annuity income riders can do for your clients? Consider starting with a specific income need and then work backward to solve the problem.
THE SALES CONCEPT
While many producers work with their clients to develop comprehensive strategies designed to achieve a satisfactory retirement dream which may be realized, consider a different approach. Many clients think in terms of needing money to meet specific needs that will arise in the future – money for retirement living, nursing home, visiting grandchildren … even taking vacations.
Why not offer them a way to secure a guaranteed income payment to pay for those future expenses by positioning the income rider in a way that parallels how they think about their future needs? As industry expert Jack Marrion has found with his behavioral finance research, most consumers think in these specific terms. There’s no need to think about drawdown rates, lifestyle change risk with market downturns or emotional anxiety related to market volatility. Selling the annuity income rider as a means to pay for specific future retirement expenses can be a great way to solve clients’ problems the way they think. Address this by telling your client, “Tell me how much you’ll need to cover these future expenses, and I can tell you exactly how much you’d need today to pay for those expenses.”
Let’s take a look at an example. Your client, age 61, plans to work until age 70. He’s paid off his house and plans to use Social Security Income and other savings for living expenses. Your client comes to you and wants to make sure he and his wife have enough money in retirement to cover three future budget items: visiting their grandchildren, leasing a car and making a charitable contribution to their church.
Their annual income need to cover these items is $12,000. What will it cost the client to guarantee the couple will always be able to pay for these expenses? With the Income Edge Plus income rider from Aviva, the cost is $120,292. It’s that simple. Using one of today’s leading annuity income riders, you can solve your client’s future discretionary needs with a guaranteed payment solution for the rest of his life. Here, the annuity product provides your client a premium bonus and income rider base annual increase of 6.7% for 9 years, followed by a payout rate of 5.25%. He won’t have to worry about market fluctuations, drawdown rates or running out of money. Rather, your client can rest assured knowing he has a predictable, guaranteed lifetime income solution to address the specified future budget needs. The chart on the next page shows how much premium would be needed in this example at various deferral periods with the same Income Edge Plus rider.
Many producers believe that a fixed indexed annuity with an income rider can more efficiently cover a specific income gap in a client’s retirement income stream than a diversified portfolio. This is because even a well-diversified portfolio can fluctuate in value while a fixed annuity’s income rider payments are guaranteed at the time the client buys the annuity.
Using this sales concept is also appealing because it does not rely on complex interest crediting methods, vesting schedules or other confusing product features. There’s no smoke and mirrors – just simple math to arrive at the premium you need today to pay for those future income needs.
Selecting the correct income rider for your client’s needs is relatively simple once you’ve figured out two factors: 1) how much money the client needs in the future and 2) how long until it’s needed. Your client often has in mind how much money will be needed, but be sure to help him or her understand what an inflation-adjusted, realistic budget might be. As for the second issue, help your client understand the value of deferring income and selecting a carrier’s annuity base contract and GLWB rider that offers the ideal flexibility if financial circumstances might change. The Income Edge Plus rider used in the above example offers attractive accumulation and payout rates.
What’s great about this sales approach is that it’s both intuitive and basic: You need $X in the future for that Y expense, and here’s what it will cost. There’s no need to worry about what happens if the market crashes again or if interest rates remain at historically low levels. Your clients can benefit from an easy-to-understand directed solution which offers emotional and financial peace of mind. Finding a safe, guaranteed product with a reliable income stream is top-of-mind for most clients today. Annuity income riders solve this problem and do so using the same frame of reference clients actually use.
FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 12120 – 2011/12/29 | 18792 364141
Income Edge Plus [AIRW (02/08) or state variation], an optional rider for which an annual premium is charged, and the Income Preferred Series [IA6 (09/09), IA10 (09/09), IA10B (09/09), IA10I (09/09) or state variation] are issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by State. See Product Disclosure for details. The rider is not available without purchase of the annuity contract. Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC.