Prospects have five objections to annuities that every seller is familiar with, but these can all be turned around to fulfill the real need clients have.
Because of concerns about market volatility and low rates, now is an ideal time to speak about the benefits of annuities, namely the potential to earn returns greater than traditionally conservative products like certificates of deposit and money market funds while continuing to protect their contract value from market losses.
Many of the common objections that financial professionals hear can be attributed to a consumer’s lack of awareness or education relating to suitability, how annuities work and their cost. Let’s take a look not only at these common objections, but also at some suggestions on how to address them with clients and prospects.
 The fees associated with annuities are too high.
All annuities are not created equal. It is true that variable annuities, which have sold well over the past few decades, can include fees and expenses of 200 to 400 basis points annually. These costs can include the base contract fee, the cost of the investment options and the cost of an optional income and/or optional death benefit riders. On the other hand, fixed annuities generally do not charge explicit fees or expenses as a part of the core contract, and that means 100 percent of a contract owner’s money can go to work on day one. Many indexed annuities offer an optional guaranteed lifetime income rider, usually charging an annual fee of less than 100 basis points. Clients will find that the additional cost of the guaranteed income rider is justified by the security of knowing their income will be there for life and the added flexibility of maintaining control of their contract value.
The key to overcoming this common objection is to make clients and prospects aware that annuities come in a broad array of varieties, and not all can be characterized as “expensive” to own.
 This is a bad economic climate to be purchasing annuities.
Some consumers will point to today’s low interest rates as a reason to not buy annuities. Yes, rates are hovering near record lows with the average 5-year CD yielding just 0.78 percent a year, according to Bankrate. Money market accounts generally are offering less, with the highest yielding around 1 percent annually, according to Bankrate. Given these historically low yields, a fixed indexed annuity can provide for greater upside potential as well as protection of principal. When assets earmarked for retirement are generating interest that trails the rate of inflation, consumers may be taking on more risk than they realize.
Again, many consumers may not recognize that there are different types of annuities available to them. By educating clients on the many flavors of annuities available today, this common objection can be overcome.
 Owning an annuity means I don’t have any access to my funds if I need them.
When looking at annuities compared with other options, it is important to know the facts. Money market accounts can offer greater penalty-free access, but as mentioned earlier, even the best options are offering only 1 percent a year. CDs often charge penalties for early withdrawals and early termination of a contract. These penalties result in loss of some or all interest earned, but generally do not result in loss of principal. While most annuities have surrender charge periods, generally between five and 10 years, and some also have a market value adjustment, many allow up to 10 percent in penalty-free withdrawals of contract value each year. Additionally, many have further provisions for expanded penalty-free access if necessary due to medical confinement.
When faced with this objection, it is important to put liquidity into context for your clients. While money market accounts may allow for penalty-free access, compared with CDs, many annuities stack up quite favorably in the category of liquidity.
 Annuities cannot protect what’s in my 401(k) from the market’s ups and downs.
With an age-based in-service withdrawal from a qualified plan, offered by up to 90 percent of defined contribution plans today, an annuity can offer protection and guarantees on assets for those approaching retirement and still in the workforce. It is important to bear in mind that each plan may have its own set of restrictions and limitations.
For the sake of illustration, let’s say your client is 59½ years old but won’t be retiring until age 65. That’s five and a half more years during which his or her 401(k) may be vulnerable to the ups and downs of the market. With an in-service withdrawal, even while still working, your client may be able to move a portion of his or her current 401(k) (depending on plan rules) as a direct rollover to purchase a fixed indexed annuity established as an Individual Retirement Annuity (IRA). This can help protect those retirement assets from the downside of market volatility and create a guaranteed stream of retirement income.
By educating your client about the ways that annuities can help protect their hard-earned 401(k) assets from market volatility, while enabling growth potential for those assets, you can overcome this common objection.
 Annuities are for older, conservative investors … not for someone like me.
Many consumers in their late 40s or early 50s may think they are too young to own an annuity. They may tend to view annuities as offering one main benefit: guaranteed income. What many don’t yet recognize is that annuities also can provide a platform to accumulate and grow assets on a tax-advantaged basis. The benefits of creating more guaranteed income often appeal to a more mature audience. However, by educating those still in their prime working years about the role that an annuity can play as an accumulation vehicle and alternative to traditional fixed income options such as bond mutual funds, you can address potential concerns that these products are only suited for older individuals.
In general, annuities are often misunderstood by many consumers.
Annuities, and in particular indexed annuities, provide a range of benefits that are not generally offered by other financial products: no explicit fees to own the product and lower fees than most alternatives if an optional income rider is selected; opportunity to create guarantees for hard-earned 401(k) assets, even while continuing to work; higher yields and growth potential than offered by traditionally “conservative” products, and better access to contract value than some conservative alternatives. Helping your clients understand the facts about annuities can demonstrate your value as an advisor and create new opportunities to grow your business.