While it's important to discuss the specific features of annuities with your clients, it's best to first help them understand if an annuity may fit into their personal financial plan. By talking through your client's risk tolerance and goals, you can help them discover how annuities may address their individual objectives. With this approach, clients can feel confident that you're listening to their needs and matching them with a product that can help them achieve their goals.
Here's how to start this conversation:
Think about the future
Before recommending a product, have a clear sense of the client's financial background and plans for the years ahead. First, ask questions about your client's financial concerns. For example, what is their risk tolerance, and how do they feel about market volatility or making their money last? Then narrow in on specifics for the future. Do they want to travel extensively early in retirement, leave a legacy for their children or simply ensure that they don't outlive their savings?
Find the right fit
Once you've had a broad conversation about your client's financial goals and concerns, determine if an annuity could be a good fit. If so, you can then discuss the type of annuities and features your client may want to consider. Annuities can be helpful in these common scenarios:
- Guarantee income for life. Annuities can supplement income from traditional employer-sponsored pension plan, Social Security and personal assets.
- Ensure a surviving spouse has adequate funds. Annuities typically include options that allow surviving spouses to continue receiving payouts for the remainder of their lives.
- Leave a legacy. Annuities can provide beneficiaries with a benefit in the event of the annuity owner's death.
- Ease concerns about an economic downturn. Annuities can provide protection from loss due to market downturns. For example, fixed indexed annuities can provide a guaranteed floor for a client's retirement savings meaning they’ll never receive less than zero interest credits in any given period, but it is possible not to earn any.
- Opportunity for potential growth. In addition to the downside protection offered by fixed indexed annuities, these individuals also gain the potential to earn interest credits based in part on the upward movement of a market index. And, any interest credits they earn are locked in, meaning they cannot be lost even if the market goes down.
Provide the details
If clients determine that annuities could play a role in their financial plan for retirement, it is important to discuss the details. Begin by explaining the mechanics of growth potential, guaranteed income and protection from market loss. In this part of the conversation, be sure to cover the annuity's interest crediting structure. It's also important to review considerations like withdrawal charges, Market Value Adjustments (if applicable) and tax considerations so clients have a complete picture of the product they're buying. This is what makes a suitability assessment an important part of the purchase process.
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