Selling FIA's

Mar 12, 2008

  1. midwestbroker
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    midwestbroker Guru

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    Well, the Medicare lock in is almost here, and I have decided to start looking into annuities to offer my clients.

    I have a new local IMO that I am doing some MA's with, and they are wanting to sell FIAs. They have been doing some in the past, but are now getting ready to really hit the ground running.

    I have a book of clients, they have marketing plans in place, I just want to be comfortable selling them. With MA's, supplements, and senior life products, I have no problems selling and talking about them. I want the same comfort level with annuities, and I know that will take time.

    But for now, I thought that I would come over to the annuity thread and see what the masters are doing.

    So, how are you selling them? Presentation book? Note pad and paper? When dealing with seniors, is there a particular product I should stay away from?

    Thanks in advance!
     
  2. padthaiforlunch
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    padthaiforlunch Guru

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    If you sign up with American Equity, they will send you a cd with sales presentation ideas.

    What you're really selling here is sleep insurance where they can have some of the gain but none of the loss of the stock market.

    The Wall Street Journal had an article last year about immediate annuities being an integral part of retirement planning. The gist was that if a senior has his core expenses covered with income from an immediate annuity, it permits the senior to be more aggressive with other investments.

    Since you are targeting seniors, you will likely find they have money in cd's. I would look at multi-year guarantee annuities that outperform cd's. Seven years is probably the longest term I would go, with a target of four or five years.

    Another factor is lowering taxes. The percent of social security income that is taxed rises as income increases. Using annuities, you can increase their cash flow while decreasing their taxes.

    Consider the split annuity, you can lower their taxes, increase cash flow and keep their principal intact.

    Here is an illustration http://www2.equitrust.com/docs/ET-SPL-1104-5-07.pdf

    The reason the immediate annuity has a lower tax bill on the same monthly income is because part of the monthly distribution is the premium paid.

    I would not use an FIA for seniors at this time. Too much market volatility -- not good for FIA's, given the crediting methods. Equitrust had a two year point-to-point with no spread, no cap and 100% participation, but that has been replaced with a two year monthly averaging. Currently, I'm not really happy with any of the crediting methods being offered.

    Another selling point for seniors is the guaranteed lifetime income benefit rider. Aviva will credit up to 15% first year for glib with a guaranteed 4% annual growth until lifetime benes start payout.

    Hope this helps.
     
  3. Mr. Bill
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    Mr. Bill Guru

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    Okay, first, forget all the sales "points" - go directly to the end game: what happens if the client dies within the surrender period, after the surrender period, in other words, do worst case scenario planning. Many annuity companies have offered big crediting strategies that they then take away after the first year. Some of them are getting just weird. Transamerica has a strategy that credits 100% up to 21 or 22% (I forget which) less 3%. So if the S&P 500 increases by 5%, your client gets 2%. Great, huh? Oh, I guess they more than make up for it in years that the S&P does 20%....

    Also, understand exactly how they're being credited with the "bonuses" - many of them won't actually "vest" in the bonus until after the surrender period, or year 15, whichever comes later.

    You get my drift? What I would recommend is select a few carriers and ask for sample documents and read them yourself. FMOs don't have a vested interest in telling you the truth. Many of the employees don't know themselves, but guess what? The client doesn't care. Ultimately its your own actions you will have to defend to your client, or even worse, their beneficiaries.

    Best of success!
     
    Mr. Bill, Mar 13, 2008
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  4. midwestbroker
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    midwestbroker Guru

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    Thanks for the input and illustration.

    Correct in that most of my business will probably be CD replacement. Currently I offer single premium life products for people who want to leave the money to their beneficiaries and do not need it for income.

    I have been curious to know what happens to the annuity if the annuitant passes prior to the end of the surrender period.

    I have talked to numerous clients who already own annuities and like them.

    There is an annuity presentation that I am going to Monday being done by an annuity marketing outfit, so I am going to bomb-bard them with questions.

    I was told by a NYL agent that they are no longer offering FIA and are only going with the variable annuities. He said that the FIA have too many moving parts and are too complicated to mess with. Any comments on that?
     
  5. bluemarlin08
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    bluemarlin08 Guru

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    I would stay away from the entire EIA market. The moving parts are baffling, the insurance companies don't have an incentive to keep participation rates and caps competitive after the initial period, and as mentioned earlier most FMO's can't answer the tough questions. Keep your E&O coverage up to date, remember class action suits. The advantages are way oversold,IMO.
     
  6. midwestbroker
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    midwestbroker Guru

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    What is the initial period? As in a 5 year annuity is up all the rates change or can they do that prior to the surrender period?

    In the market place for seniors and "safe" money, what options do they have? Bank CD's, annuities, life insurance (if they do not need the money)...is there another product out there?

    I remember seeing a program a few years back that allowed an agent to offer bank CD's from across the country, looking for the highest rate possible for the client. The commission,if I remember, were next to nothing but that may be a good product to have in your back pocket.
     
  7. Mr. Bill
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    Yes, absolutely agree with Blue. With respect to PadThai, one of the problems with the split annuity process is that once the very first check from the immediate annuity is cut, if the client dies, there's no benefit for the heirs (barring some sort of guaranteed payout). That's fine as long as you've already sold the life insurance as loss replacement for the estate. Problem is, salesmen like annuities because there's 1) no underwriting and 2) they get paid fast.
     
    Mr. Bill, Mar 13, 2008
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  8. indaville
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    indaville Super Genius

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    FIA's are a wonderful product for the right person. Be sure not to "over sell" the gains. Make sure the client understands that they will not go up as much as the index goes up. If you are moving money from securities be prepared to get a securities license if you want to keep your insurance license (in most states). IMHO stay away from two-tier products. Make sure the client understands the time commitment. Make sure you understand the pros and cons of each product you offer.

    I love FIA's. This year I will do $10,000,000-12,000,000 in FIA production. They are not a perfect fit for everyone, but for the right person they are hard to beat.

    Good luck!
     
  9. Winter_123
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    Winter_123 Guru

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    Well, variable annuities with hidden fees can be problematic too. In addition to the downside in a down market.

    There is more going on the background than meets the eye. Broker dealers are responsible for supervising everything that reps do and the feds are always toying with treating EIA's as securities (I know that could be a 12 hour discussion in itself). So the Broker Dealers are pulling away for regulatory reasons and due to the requirments that they supervise reps that are selling products that they are not even familiar with. Not to mention the fact that while the B/D's are badmouthing EIA's they are losing loads of business to them and want that money in their variable annuities. They dont want their reps selling competing products.

    Winter
     
  10. Mr. Bill
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    Mr. Bill Guru

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    Okay Winter, I would say the wildest Condi picture by far....

    Love it!
     
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