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Annuities Uncover Hidden Retirement Plan Opportunities

Clients as well as advisors may not completely understand the opportunities annuities hold for retirement plans.

Although they don’t necessarily provide the highest possible rate of return, annuities can bring needed stability and security to a well-rounded portfolio. As clients are likely unaware of the capabilities, it is your responsibility to communicate the potential benefits and considerations for their retirement and overall financial strategy.


Explain Financial Safety Net

Asset classes have three possible outcomes for clients: gain money, lose money or break even. Although many clients hope to earn money through their portfolios, consultative meetings may reveal they are not willing to risk losing anything in order to do so. With certain types of annuities, clients are protected from negative risk potential and gain a financial safety net for their retirement plan. When properly structured, annuities can provide hesitant clients the opportunity to eliminate loss and pursue financial growth.

After clients understand the benefits of annuities, a logical discussion can motivate them to transfer a portion of their investments into annuities to move their money out of a position of risk. After their objections are answered, most clients will seriously consider annuities and feel reassured about their value. Clients who believe their current savings will not be substantial enough to maintain their standard of living during retirement should be particularly interested in annuities.


Determine Risk Avoidance

When clients acknowledge that annuities are a good fit for their holistic financial plan, it is vital to determine their risk avoidance and tolerance levels. Ask how much money they are truly willing to lose. Dig deeper to determine the amount of money lost in an investment that would cause them to lose sleep at night. This is the amount that you need to ensure is protected and set aside with annuities. This ratio will be different for everyone. Help each client take into account how much they have saved for retirement, their current financial stability and their future saving power — all of which will influence how much they might consider placing in annuities.

Similar to other products and planning strategies, age is not necessarily a determining factor for how much clients should set aside. Individuals establish their own comfort levels. For instance, one of my most aggressive clients in terms of investment risk is 85 years old. Other advisors likely work with extremely conservative investment clients who are only in their late 20s. Do not rely on age as an indicator for change in investment strategy. Rather, continue to revisit plans on a regular basis and adjust accordingly as each individual’s financial needs change.

There’s no perfect product, and annuities are no exception. Clients should invest only a portion of their savings into annuities to complement a well-rounded financial plan anchored by other tactics. This can provide predictable outcomes to balance other investments subject to risk and volatility. With this strategy, a client’s standard of living should not be compromised if the market goes down.


Match Client Needs To Annuity

Consider clients’ plans and financial goals when selecting the type of annuity that would best fit their situation. A combination of various annuities can help serve clients’ unique needs, risk tolerance and time horizons. Wealth distributions provide a source of income postretirement, and certain annuities also offer a guaranteed death benefit, so clients will not lose any of the money they invest.

If you are not already using annuities as part of your financial advising strategy, it may be time to incorporate them into your conversations with clients. Annuities can be a valuable tool for financial planning that will make clients feel more secure, fill out their retirement plans and help maintain their standards of living postretirement.



Eszylfie Taylor is the founder and president of Taylor Insurance and Financial Services in Pasadena, Calif., and creator of The Taylor Method, his sales training system for financial advisors. He is a 15-year member of MDRT. In 2015, he was the recipient of NAIFA’s Advisor Today Top 4 Under Forty award. Eszylfie may be contacted at [email protected] .

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