If you are reading this magazine, chances are you have sat through at least one meeting with a variable annuity (VA) wholesaler. If so, my guess is that you may have found the experience confusing, if not numbing, especially when the wholesaler started talking about GMIBs, GMABs, GMDBs, and EEBs.
The fact is that variable annuity wholesalers tend to get so caught up in product features that they lose sight of the end game — to help advisors maintain their clients’ lifestyle throughout their retirement. I know because I used to be one of those VA wholesalers. Your clients tell you that they need guaranteed income for life, can’t afford to run out of money, or want to leave some money to their children. So, why are we not selling more variable annuities, which are designed to help with all those goals? Because too often, there is a major disconnect between the conversations you have with your clients about their needs and the conversations you have with wholesalers about how VAs can help meet those needs.
If you have experienced the feeling that something gets lost in translation, you are not alone. In 2006, AllianceBernstein issued a research study confirming this widespread disconnect on VAs. They surveyed 13,000 investors working with financial professionals and 1,000 non-VA-selling advisors, 77 percent of which managed at least $100 million in assets. In-depth interviews were conducted with 300 advisors from various distribution channels. The advisors were asked why they were not selling VAs. Their answer was that “the conversation needs to change” — essentially, that the variable annuity dialogue is too heavy on jargon and features and too light on strategies for meeting client needs.
The opportunity
At the same time, the study confirmed the growth opportunity for new variable annuity sales. Of all the non-VA sellers surveyed, 95 percent said they focused on retirement planning and income planning.
Clients are focusing on it, too. Of the 13,000 investors surveyed, 93 percent said they wanted a guaranteed source of retirement income. Ninety percent responded that “guaranteed retirement income would make the biggest difference in feeling confident in retirement.”
The research made clear that many high-producing “mega advisors” who don’t sell VAs are actually perfect candidates for doing VA business. Their practices focus on retirement and income planning, and their clients overwhelmingly need income-oriented products.
The “I” word
The study confirmed that many advisors do not connect the idea of income planning with variable annuities because they are simply turned off by the onslaught of insurance jargon. Eighty-six percent of respondents expressed interest in discussing a product that provided guaranteed income in retirement with the potential for market appreciation, and 77 percent were interested in being trained on income planning.
When asked if they were interested in training on insurance products, however, only 19 percent said they were. In short, when guaranteed income benefits are described using the words “insurance” and “variable annuity,” interest plummets.
Changing the conversation
These numbers tell the whole story. What needs to happen to close the gap? Wholesalers need to stop spewing insurance jargon and talk plainly about benefits — “guaranteed income” is what clients need, not “GMWB.” Wholesalers also need to speak less, listen more, and understand better. We have one mouth and two ears for a reason — so that we can listen twice as much as we talk.
When we do talk about variable annuities, let’s all talk about their benefits, not their bells and whistles. Wholesalers and advisors need to understand this before we can ever expect clients to be convinced of the role variable annuities can play in their retirement financial plans. We can all do a better job of connecting clients with the strategies that may help meet their needs, and there has never been a better time to do it, or perhaps a more critical time, than right now.
It starts with a two-way dialogue. Advisors need to resist acting as sounding boards for wholesalers’ product pitches. They need to tell wholesalers about their clients, ask more questions, and expect practical advice.
Getting started
Changing the conversation about VAs should lead to a more consultative relationship with your VA wholesaler. Here are a few ideas for getting started:
» Accept an appointment with a goal in mind. Ask a VA wholesaler to come to your office prepared to help you place your clients into groups that need regular sources of income over the next one, three, and five years.
» Give them the “mother test.” Ask your VA wholesaler if they have advised their own family member to buy their annuity product and why. After all, it’s not important what a VA wholesaler knows. What’s important is that you know that they actually care.
» Gather testimonials. Ask a trusted annuity wholesaler to share with you a personal pension or protected income story. Learn just one or two of these stories well and stick to them when presenting to your prospects and clients.
» Collect consultants. Invite a couple of wholesalers whom you trust to be part of your team, serving as annuity consultants in your practice.
So remember: It’s not about the bells and whistles of your product. It’s about meeting your clients’ needs with a solution. Make sure you’re on the same page with your wholesaler regarding the best approach to offering VAs to your clients, and stay consistent in your message for the best results.
Kirby Noel is national sales manager and head of the independent financial planner channel of AXA Distributors LLC. He can be reached at 212-314-5685 or kirby.noel@axadistributors.com. 