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A New Approach to Annuity Sales

Earlier this week, the Insured Retirement Institute (IRI) held it’s annual conference, VISION, giving industry members an opportunity to learn about emerging trends, network with peers, celebrate the organization’s 25th anniversary and connect with experts on a variety of topics that encompass the retirement industry. According to a recent InsuranceNewsNet article, one such expert was Ken Harman, a psychologist and managing director of the AB Advisor Institute, who discussed an overhaul to the traditional annuity sales approach.

The focus of the conference was centered primarily around the 18-month hold that has been placed on the implementation of the DOL’s fiduciary rule. The delay actually gives retail advisors an opportunity to pause and rethink the way in which they pitch annuities to potential clients. Longevity risk, or the risk of outliving one’s savings, is a very real concern for most approaching retirement. Yet studies have shown that many retirees aren’t attracted to annuities, despite the fact that they dilute longevity risk. Harman urged advisors to think of insurance and risk pooling as an act of civilization and social construct, providing a refreshing approach to annuity sales.

For many years, annuity products have been sold as narrow, complex  income products with many bells and whistles attached. But as millions of Americans lose their pensions and are left to fund their own retirement, Harman suggested a wider view of the products, helping advisors better communicate the benefits of annuities. He suggested that advisors will have a better chance of helping consumers understand annuities if they explain them in the context of risk dilution.

“Start the conversation as income insurance, not an annuity,” said Jamie Cox, managing director of Harris Financial Group.

For example, a fire insurance policy pools, or dilutes, the individual risk of property loss among thousands of policyholders who pay premiums. A similar concept can be applied to annuities, guarding against individuals outliving their savings. This concept could be much more effective in educating consumers as opposed to throwing around jargon like cap rates, index values and guaranteed minimum withdrawal benefits.

Harman argues that by changing the message around annuities to “taking the high ground,” advisors will be able to open up a dialogue with clients instead of bombarding them with product choices loaded with an overwhelming amount of optional features.

“We need to get out of our own way, and simplify the explanation of what we do,” said Barry Stowe, chairman and CEO of Jackson National Life.

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