Anyone who has been doing financial planning for any period of time has heard the moniker – we work in a highly commoditized business, and there is nothing new under the sun. I have been a proponent of that belief, and have always worked to provide great ideas along with my product positioning. But is it possible that the product can become the idea? I believe that it can, and I think you will agree as I make my case…
We have all seen the numbers reporting the amount of investment dollars languishing in money market accounts, CDs, and other fixed investments. It is a staggering sum. In light of the pathetically low rates that these accounts are being credited, it is not money buried under the mattress, it is money melting through the mattress. So we must infer that the primary goal for these monies is not to maximize return ON the investment, it is to maximize the return OF the investment.
If that is the case, it is also fair to assume that the balances in these accounts are earmarked to be spent at some future time, and must be available when needed. Combine that with the demographic numbers we are all familiar with – 78 million baby boomers preparing to retire, most without pensions. Life expectancies increasing every year and health care costs soaring. The simple return of the investment will prove woefully inadequate in preparing for the future that many baby boomers are realizing is THEIR future.
The answer (please don’t laugh when I say this) is a fixed annuity. Before you close out of this screen in disgust for the terrible advice, keep reading for just a little longer. Seriously now, the clients who have hidden their money in cash are getting one to two percent return and NO guarantee regarding how long that money will last when they begin to spend it down.
You COULD show your client the best alternative I have seen to date – a fixed annuity that will meet or beat the rate your client is currently receiving. An 8% premium bonus on all premium payments made in the first two years. A lifetime income rider that will roll up at 7.2% compounded for 20 years. Oh, and the benefit can be used as a death benefit if the owner so chooses. Yes, these products do exist, and yes, our advisors are having tremendous success positioning them with their “safe money” clients.
I am sure you can think of 5 to 10 clients in your book that fit the profile we just examined above. Why not pick up the phone and ask them one question: “I can show you how to take that CD at the bank and most likely beat the rate you are currently receiving. In addition, we can turn it into a personal pension that will guarantee to provide income for the rest of your life, and the life of your spouse. Isn’t that something you would like to sit down and discuss?” I know for a fact that our advisors are closing business using that approach.
As the dog days of summer begin to wind down and we look toward the start of the football season, this idea should be used as a campaign with your existing book – reengage with your clients coming out of summer, give them an idea that will help build lifetime income, and set yourself up for a strong start to the fall months.
As always, we stand ready to help – give us a call if you would like to know more about this idea or these exciting products.
- For Some Retirees, This Annuity Makes Sense (forbes.com)
- Annuities draw new look at time of uncertainty (sfgate.com)
- How to Estimate Lifetime Income Annuity Payments (retirementplanning.suite101.com)