Guaranteed income for life is possibly the most comforting financial benefit you can offer your clients. With this in mind, it’s natural for many agents and advisors to present annuity options that ensure clients receive the maximum dollar amount in their income withdrawals. Thus, 8% and higher roll-up rates have been the name of the annuity game in recent years. But do your clients’ means only aspire to one end? Are the rewards of a retirement income all they hope for after saving for so long? It’s possible that some of your clients have a broader range of financial goals that need to be achieved.

The Annexus Group understands the importance of considering these additional retirement needs, and that’s why they’ve added the Total Benefit of Ownership (TBO) concept to their widely used Income Advantage Calculator. TBO offers an opportunity to measure the whole life savings story. By keeping this concept in mind, you can calculate the total value an annuity provides clients over their lifetimes – not simply from an income standpoint, but also taking into account the accumulation value and death benefit.

The innovation of the TBO concept was developed in response to expressed consumer needs – needs about which some agents seem to be in the dark. According to a recent survey highlighting the gap between clients’ needs and goals and advisors’ perceptions of these desires, only about 15% of advisors believed principal protection was a top priority for clients. In reality, roughly 89% of clients selected losing their wealth as their primary concern. To that same tune, nearly 80% of clients said ensuring their heirs are taken care of is a key financial objective, while only about 15% of advisors were aware that sentiment existed.¹

The takeaway: Listen up – legacy matters.

In today’s industry, agents and advisors may overlook all of the ways clients want their money to work for them. Sometimes, products with income riders that produce the highest dollar amount are selected based on that merit alone. The aim of the TBO concept accompanying Annexus’ Income Advantage Calculator is to widen the lens. By illustrating the entire investment picture, it becomes clear that clients can have the income-legacy balance they’re looking for. Most importantly, TBO allows you, as the advisor, to provide them with a well-crafted financial recipe for a successful retirement.

The Annexus Group’s BalancedAllocation Annuity series represents the type of balanced products that add up well in total benefits received by clients. By steering clear of the annuity rate race, these annuities weigh in with smaller roll-up rates (6-7%) but finish the fight yielding notably larger accumulation values and death benefits. They accomplish this with their unique, uncapped indexed strategy that allows for higher potential indexed interest return than standard annual reset strategies.

Let’s look at an example of how the TBO illustrator can help you show clients average benefit outcomes. (If you plug in products, the calculator will give you exact average numbers, but we’ll round them off for this example.)

A 65-year-old wants to put an initial premium of $1 million dollars into an annuity, and elect to take income at age 75 for 10 years before death.

A product with a simple roll-up rate of 10% guarantees an annual income of around $150,000 from age 75 to 85. You show the client the numbers, and they’re thinking that large income could support their exciting lifestyle. However, the TBO shows that when your client reaches age 85, he will be left with no accumulation value and no death benefit. With low caps and a high level of potentially unneeded income eroding the accumulated value (AV) much faster, the client’s beneficiaries are left with nothing. The total benefit of ownership illustrated: around $1.4 million, solely from income.

Now, plug in a product with an 8% compounded roll-up rate. Your client’s annual income for 10 years drops to $140,000 but is still quite impressive. This time the lower roll-up rate affords a small accumulation value or death benefit worth about $200,000. Remember, even though 85% of producers might have been unaware, it’s extremely probable that securing a financial legacy is a high priority for this client. In this example, the AV isn’t eroded as much because the income amount is slightly lower, but the low caps and low indexed potential still can’t keep up and leave the beneficiaries with next to nothing. The product’s TBO totals approximately $1.6 million.

A 7% compounded roll-up rate is the winner on the TBO illustrator. The product offers $115,000in annual income for 10 years, and it comes through for the client at age 85 when they’ve accumulated around $1.5 million in value with an option to pass that money on as a death benefit. High indexed potential replaces the income taken, leaving a serious legacy for the beneficiary. The total benefit of ownership for these products that take into account the entire life savings story: $2.5 million to an upwards of $3 million – all from the same client’s $1 million initial premium at age 65.

There’s a major difference in these product examples that is clearly illustrated by the Annexus TBO concept addition to the Income Advantage Calculator. At first glance, it makes sense because the products serve different purposes. Some clients want and need more annual income, but others may not. The lesson learned here is that assuming makes for bad retirement planning. The survey results show that principal protection, accumulation value, death benefit and financial legacy are top priorities for clients. To ignore these facts would be a big mistake.

Rather than selecting product based on roll-up rates alone, reconnect with clients first to help eliminate the gap. Make sure you truly understand their financial goals before making any recommendations. Then, contact your Creative Marketing Annuity Sales Consultant to learn more about how you can use The Annexus Group’s Total Benefit of Ownership concept and calculator to illustrate all that an annuity can offer.

¹ Bowen, John J. Jr. Rediscovering Your Clients.Financial Planning Magazine, March 1, 2011.

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11888 - 2011/8/24 | 18377 244241

The BalancedAllocation Annuity™ [BAA12 (09/09) and BAA8 (09/09) or state variation], fixed indexed annuities, and the Family Endowment Rider® (DBR (09/09) or state variation), the BAA Premium Bonus Rider with Enhanced Death Benefit [BDBR 12 (09/09) and [BDBR 8 (09/09) or state variation], and the BalancedAllocation Income Advantage™ (BAAIR (09/09) or state variation), optional riders for which a charge is deducted, are issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by State; see the Product Disclosure for details.