ENSURING THAT A FIXED ANNUITY SALE IS THE RIGHT SALE
Craig D. Simms

Craig Simms is the Senior Vice President of Marketing and Sales for Windsor, CT-based VantisLife Insurance Company. VantisLife has distributed life insurance and annuity products exclusively through financial institutions since 1942.
 
 

AN INVESTMENT EXECUTIVE (IE) who is based in a bank branch works in a unique environment. The bank, in essence, is a financial services "superstore," with a plethora of products available to customers in a decidedly retail environment. The primary challenge for IEs is to help customers "walk the aisles" of the store, helping them to select the most appropriate products for their needs.

Unfortunately, some customers tend to be impulse buyers. Of even more concern, some IEs are impulse sellers. Instead of spending a few minutes consulting with the customer and guiding them to the most appropriate product choice, they often "write the ticket" and move on.

Interestingly, most fixed-annuity suitability profiles are focused on determining the financial impact on the client's cash flow. While it is critical to determine the overall financial impact of a fixed-annuity purchase on the customer's finances, this task will not, by itself, indicate if an annuity is the most suitable product.

Asking a simple question

Making the most appropriate product selection for your customer starts with one basic question: "Can you tell me what this money will ultimately be used for?" Simple? Yes. But more importantly, this question is unabashedly poignant. And as most IEs know, simplicity is key when trying to be an effective advisor to seniors who may have only a basic understanding of financial planning or, worse, may have some impairment.

The answer that a producer receives to this question can immediately guide the IE to the next step in the process. If the answer is "I want to use the money in retirement," then the IE may direct the customer toward a fixed or variable annuity that can offer tax-deferred features and the ultimate benefit of lifetime income guarantees.

If the answer is something else, such as "I plan to give this money to my children when I die," then an annuity is obviously not the right product choice. In fact, the IE can do a disservice to this customer by exposing his or her heirs to tax consequences associated with the passing of the annuity proceeds to designated beneficiaries.

A better choice in this situation may be a single payment life insurance policy, where a single payment increases in value by a factor that's based on the customer's gender, age and health, resulting in a death benefit that is immediately larger than the original payment. Because of this immediate increase—and because the resulting death benefit passes income tax-free to beneficiaries under current tax law—this type of product is a good match for people whose ultimate goal is to transfer wealth. What's more, the customer does not need to be wealthy to buy such a product. Industry-wide, the average single premium life insurance deposit is around $32,000.

For example, with VantisLife's EstateWise single premium whole life policy, a 65-year-old woman who does not smoke and is in good health, making a single payment of $30,000, can secure an immediate death benefit of $64,046.

There are other choices as well. For instance, if the customer is younger and in good health and has the same desire to leave money, upon his or her death, to loved ones, then a recurring premium universal or whole life policy may be the right choice.

In addition, the impression that life insurance takes much longer to write and close has been debunked in actual practice in the bank channel. For many companies that have online quoting and submitting processes, a life insurance sale can take as little as 15-20 minutes.

In summary, here is a recap of the key features of annuities and life insurance. Keeping this checklist in mind can help guide IEs toward making the most appropriate choice for each customer:

Annuities

• Build cash value on a tax-deferred basis
• Systematically distribute accumulated assets
• Pay annuitant an income for life in exchange for a premium
• Reduce the financial uncertainty of living too long

Life Insurance

• Creates an estate
• Pays beneficiary specific sum at death in exchange for a premium
• Reduces the financial uncertainty of dying too soon