How to frame annuities within a client-centered conversation

An annuity can be a versatile financial tool that can help clients across various life stages meet a wide range of financial goals. Depending on the annuity type and/or specific benefits or riders a client selects, an annuity can help address a need for tax-deferred wealth accumulation, retirement income planning, estate planning, wealth transfer and more.

But given the misconceptions surrounding annuities, some financial professionals may struggle to confidently introduce them. That could lead to some clients missing out on benefits such as protected lifetime income options, or growth potential balanced by a measure of downside protection against loss.

The way we frame financial products and investment opportunities can have a big impact on how receptive clients are to the message. Just as every client can have a unique combination of personal wealth, financial objectives and individual circumstances, different types of annuities are designed to address diverse goals.

If you’re refining your approach to talking with clients about annuities, it’s essential to acknowledge that financial planning and investing isn’t one-size-fits-all. When you ensure clients feel informed and secure in their understanding of annuities, you build a foundation of confidence that’s vital for successful, enduring client relationships.

And when clients see that you’re paying close attention to their individual needs and goals, they may be more likely to pay attention to the benefits an annuity could offer within their diversified financial portfolio.

In this article, we’ll explore effective strategies for financial professionals to introduce annuities and their benefits, and to overcome the effects of misinformation by straightforwardly presenting the facts.

1. Start with clients’ financial goals and concerns

Pointing a client toward an appropriate annuity starts with an understanding of their current financial situation and long-term objectives. Ask open-ended questions to understand their hopes for retirement. Get to know their values and assess their risk tolerance. A client-centric approach shows you’re paying attention to their needs above all, and not simply promoting a product.

2. Walk through the basic mechanics of annuities

Provide a brief overview of what annuities are and how they work. Remember, your goal is to educate first, rather than persuade. Offer jargon-free definitions for terminology, and take a transparency-first approach. This helps demystify annuities generally, and can help set a course for an open, frank discussion.

3. Listen closely to clients’ concerns

Be attentive and courteous as you listen to any worries or objections they raise. This demonstrates respect for clients and their perspectives. It also provides an opportunity to get a deeper understanding of their values, priorities and goals. From there, you can more effectively address their fears and offer tailored guidance.

4. Don’t dismiss client unease — even when it’s based on myths

Acknowledge that misconceptions are out there and address them proactively. Explain the major differences between annuity types, the varying levels of flexibility and choice they offer, and how some can be customized with various riders to help address specific objectives.

Be clear about fees — and point out that many investments and financial vehicles charge fees. If a client’s concerned about losing access to their money, you might point out annuity products that allow withdrawals for emergencies or unexpected health expenses.

5. Use real-life scenarios to illustrate benefits

Tailor your example to what you’ve learned about your client. You might share a story of a client with similar circumstances who used an annuity to bridge a gap between an early retirement date and the onset of their Social Security benefits. Or perhaps your client’s concerned about leaving a financial legacy for loved ones — so you can demonstrate the value of a death benefit in a real-world context.

6. Underscore the importance of diversification

Make sure your client is aware of the concept of a diversified portfolio. Have they taken steps to spread investments across asset classes to reduce overall risk? That can enable you to frame an annuity as an effective way to balance risk within their portfolio. For example, some annuity types provide market-driven returns with a measure of downside protection. And unlike stocks or mutual funds, an annuity can offer options for a guaranteed income stream.

7. Provide follow-up resources

An annuity can be a major purchase for many clients, so it’s perfectly reasonable to offer to send them home with educational materials that they can read on their own time. This helps empower clients to make informed decisions based on a comprehensive understanding not just about annuities in general, but about a specific product they may be considering.

Brochures, guides, links to websites and explainer videos can all be helpful. Make sure the information you offer is clear, jargon-free and accessible to clients with different backgrounds and investment experience.

8. Be clear about your intention and your integrity

Your primary interest is your clients’ financial well-being, and your goal is to help them meet their individual objectives. You’re there to support them in making informed financial and investing decisions. When you give clients the assurance that you’re available to revisit the conversation after they’ve had time to review and reflect on the information you provide, you’re giving the relationship room to grow.

Empower clients — and yourself — with knowledge

Effectively introducing clients to annuities is about more than discussing different financial products. It’s about doing the work to understand their goals and challenges, so you can help them choose a product that best addresses them. By taking time to address common misconceptions, listen to client concerns and provide relevant information and examples, you demonstrate caring and pave the way for informed decision-making.

Empowerment comes from providing the information clients need to make choices that align with their values and objectives. Annuities, with their diverse options and potential benefits, can be an integral part of many clients’ diversified portfolios, and your in-depth understanding can help you build and grow your advisory business. 

Find more ways to nurture and strengthen client relationships by accessing our Acceleration® program. Its modules were developed to help financial professionals build more than just knowledge; you’ll build the essential skills you need to serve clients better and keep your business growing. Get started today.

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