Show Clients the Cost of Getting Out of the Market
Most clients have not anticipated the chain of events that will lead to them getting out of ‘The Market’. If we help them to see the true cost most people pay to move their assets away from market risk, it can help them make a pro-active move (instead of a reactionary move), and that can save A LOT OF MONEY. Here is a conversation an adviser shared with me that illustrates the point…
Adviser:
How much are you willing to spend to get out of the market?
Client:
It wouldn’t cost me a thing to get out of the market.
Adviser:
How much do you have in the market?
Client:
$250,000.
Adviser:
If the market fell 10% tomorrow, would you get out?
Client:
No.
Adviser:
What if it fell 20%, would you get out then?
Client:
You bet I would.
Adviser:
So, you are willing to spend $50,000 to get out of the market.
Client:
I never thought about it that way.
How to Use Return Of Premium Riders
Here’s a strategy that can come in handy when the client wants the powerful growth potential and protection from loss that index annuities provide, but they might need to access the cash value within the next few years.
Introduce them to the Return Of Premium (ROP) riders that some index annuities offer. These riders allow the annuity owner to get back 100% of their initial premium without paying any surrender fees—although any withdrawals that were taken would not be included. The upside is that the client will get the safety of index annuities, and the great growth potential, but also know that they can pull the money out with zero loss or penalty, just in case there is some sort of unforeseen development in the future.
But wait…there’s a better way to use the Return Of Premium annuities; Instead of placing all of the funds into a single Fixed Index Annuity with an ROP rider, let’s open four or five separate policies—using the exact same index annuity with ROP—so that the client will have more flexibility.
Example: Instead of putting $100K into one FIA with ROP, we put $20K into five of them. Fast forward 4 years and the client’s water heater explodes and they need $13K fast. They can trigger the ROP on just one of the five FIAs and get $20K back without penalty—leaving the other $80K to continue growing. As opposed to if they had put all $100K into a single FIA with ROP, then they would have to breakout the entire amount and would lose the 4 years of interest growth on the entire amount.
Pro-tip: there are very few FIAs that offer Return Of Premium, and they all have very different rules and limits. For example; only ONE FIA with ROP allows for the ROP to be triggered from the very first year of the policy. The others have waiting periods of up to 7 years. So, let us help do the research to make sure you get the very best policy for each client scenario.
Playing The Suitability Game
Our industry continues to develop new rules around what they feel is a “suitable sale” for annuities. Meaning, they don’t want us selling the wrong annuities, for the wrong reasons. So, they create suitability rules that we have to follow…BUT EVERY CARRIER’S RULES ARE DIFFERENT! So, play it safe and give us a call before you recommend ANY annuity to ANY client—even if you just sold one of those same annuities last week without any problems. What is suitable for one client may not be for another client. Which is why we maintain files on every carrier’s unique suitability rules. Just call us: 800-200-9194.
~ Greg Skogsberg
800-200-9194
Gregory B. Skogsberg
Greg is the President of TWH Agency with 20+ years of professional experience. Greg is a seasoned management consultant who has worked for organizations of all sizes in locations all across the country.
