Issue link: http://read.dmtmag.com/i/169596
This is an incredible realization for most insurance managers. Because only the life insurance industry can protect people from the financial impact of dying too soon or living too long, we hold the solution to the retirement crisis. The risk when a life insurance company sells a life insurance policy is that someone dies too soon. The risk when it sells a lifetime income annuity is that someone lives too long. Since the company is on both sides of the longevity risk, it can neutralize longevity risk to both itself and its clients. The Power of Guaranteed Paychecks and Playchecks Every time your advisors speak with clients and prospects about the power of annuities, there are a couple of "magic words" they need to use to make sure they are best communicating their message. Firstly, when a client asks what a lifetime income annuity is, the simple response is that it is a guaranteed paycheck for life. Clients can easily relate this to the checks they receive from Social Security. Some clients who have pensions may respond that they don't need another guaranteed paycheck. They are right, they probably don't need another paycheck, but what they could use is a guaranteed playcheck — money to use for worry-free fun and leisure, which is what retirement should be about. The element that makes annuities so special are mortality credits. Each payout from an annuity is a combination of principal, interest, and mortality credits. These mortality credits basically act as a financial reward that increases for the client the longer they live. By utilizing risk pooling, life insurance companies are able to subsidize those who die late with the capital of those who die early. While new advisors require training on this concept, even veteran advisors sometimes forget about this unbelievable advantage that allows annuities to offer a high payout rate. When your advisors explain these concepts, clients will become interested in annuities and start to inquire about investment options. They may ask, "How much should we put into an annuity?" While 50 different advisors will give 50 different opinions, there is only one optimal answer based on math and science: Clients need enough guaranteed income to cover their basic expenses for life. Social Security and pensions count toward covering these expenses, but any shortfall should be covered with a lifetime income annuity from a financially strong insurance company. Lastly, your advisors must be prepared to deal with the client question, "What should I do with the rest of my money?" The short answer is that they need to optimize their portfolio with an eye on inflation. Everyone will do this step differently, but this is where stocks, bonds, gold, and real estate can be useful investments. Clients should also consider using some of the money to buy life insurance and long-term care insurance to protect their families. Countless retirees who have done a phenomenal job investing and saving for retirement have had their entire portfolio wiped out because of unexpected medical and health-care expenses. The insurance industry is built to solve today's retirement risks and challenges. Our financial tools do things that no other investments can. With annuities, life insurance, and long-term care, you have the answers that Boomers and seniors are looking for. FALL 2013 | CONNECTIONS 21