talks
MONEY
™
...................................................
STRATEGIES FOR SUCCESSFUL
ANNUITY & INSURANCE SALES
For Agent Use Only
Volume I
Revised Edition 2006
MONEYtalks™ is a division of Success, Inc.
1508 Mt. View Road, Suite 101 • Rapid City, SD 57702
(605) 348-9908
Fax: (605) 341-0641
www.moneytalkssuccess.com
For Agent Use Only
Copyright (c) 1992-2006, Success, Inc. MONEYtalksTM is authored by
Bobb Meckenstock, Paul Strassels, and Bill Johnson. Quotation not permitted
except for specifically designated material, contents may not be reproduced in
whole or in part in any form whatsoever without prior written approval from an
authorized officer of Success, Inc.
The authors of MONEYtalksTM are providing general information, not legal or
accounting advice. Consult with your own tax or legal advisor for specific
applications that apply to annuities and other insurance products. The advertising
and marketing techniques provided by MONEYtalksTM have succeeded in cities across
the country; however, due to variable factors, the authors cannot guarantee
effectiveness in other markets. Compliance with your insurance company and
state regulations is required.
Success, Inc. All Rights Reserved
Mission Statement
I
nsurance salespeople are busy. If you were not, you would not be in the business
ivery long. There is a mountain of paperwork you must deal with. There is a
mountain of regulations with which you must comply. There is a mountain of
financial material you must study – an ongoing task that gets more and more
difficult as time goes on. There is also a mountain of personal and fiduciary
obligations you must adhere to in order to best serve the clients you already have.
And there is a mountain of work you must perform to identify those clients you will
be serving in the future.
With that in mind, we understand that you do not have time or money to waste.
However, we also recognize that you are diligent in the pursuit of information to
make your job easier. We also recognize that you want to take care of your clients in
a responsible manner as well as make a good living for yourself.
We feel that the combination of skills and experience brought together by Bobb
Meckenstock, Bill Johnson and Paul Strassels fills a unique niche in helping
insurance salespeople reach their goals – both for themselves and for their clients.
Bobb's strength lies in his over 25 years of extreme success selling financial services
products to people who will benefit from their purchase.
Bill also spent over 20 years as a highly successful financial services rep. To this
product, he brings his powerful marketing and advertising skills.
Paul speaks for the consumer. The more reps know about their clients and their
clients’ financial concerns, the better able they are at helping solve those problems.
Simply put, by joining together, we are attempting to assist those of you who are
interested in successfully marketing and selling annuities and other insurance
products to consumers. We wish you tremendous success in your endeavors.
Success, Inc. All Rights Reserved
Acknowledgments
W
e would like to thank the following people for their hard work
and the time they sacrificed after hours and weekends to complete
this project on time. Please accept our apology if we have
inadvertently omitted someone, as so many people have provided input
and suggestions.
Tom Franklin, Patricia Melville, Mark Smither, Nyla Floyd, Laurie
Musick Wright, Adel Brown, Carey Crouse, Jennifer Straus and the rest
of the staff at Franklin & Associates Advertising for their belief in the
project and their diligent creative and marketing efforts. Deborah
Strassels for editing our broken English and guiding the project from
beginning to end. Nancy Clark for devoting her Saturdays to inputting all
the writes and rewrites of the guidebook. Mark Stritar for his tireless work
implementing the daily business and marketing efforts of the project, and
Doug Maher, Chris Harding and Allison Sees for their ongoing sales and
marketing support and Jim Culey and William Schilling for their assistance in
revising and updating this guidebook. And finally our families, friends and
business associates for putting up with our tense demeanors throughout the
months of preparation needed to bring this product to completion.
Success, Inc. All Rights Reserved
Jump start your MONEYtalksTM education with this helpful information.
Reps sometimes make mistakes in acquiring and using new knowledge.
Your proper use and success with MONEYtalks is our utmost
concern. We encourage you to...
Learn the concepts!
Don't fall for another great mistake reps make and think you just show
someone a chart or graph from MONEYtalksTM or your carrier's product
brochure to make a sale. MONEYtalksTM is designed to teach you the
concepts that make annuities attractive to prospects and solve problems
they have. MONEYtalksTM is designed as an agent only aid to teach you
those powerful concepts, so you will be able to explain them properly
through your company approved sales material.
This same thought process applies to the marketing concepts, strategies
and sample marketing pieces. You're making another mistake if you think
you should only take a marketing piece from MONEYtalksTM and put it in a
newspaper, mailer, seminar invitation, phone script, radio ad, etc. and
you're worried that your compliance won't approve it.
MONEYtalksTM is designed to teach you how to create an effective
marketing piece. Of course, there are all kinds of compliance guidelines
today and you need to learn what concepts will work for you before you
spend money and time on ineffective marketing. There are a multitude of
effective techniques that follow compliance guidelines, and learning how
to create effective marketing pieces is the first step.
The greatest mistake reps make is looking at a chart, graph, or marketing
piece and saying compliance won't approve it. Learn the concepts in
MONEYtalksTM first, then work within your compliance guidelines to
dramatically improve your results.
Success, Inc. All Rights Reserved
Table of Contents
1 SELLING ANNUITIES
• What Is an Annuity?
• Annuity Facts and Figures
• The Annuity Marketplace
• State Guarantee Funds
• Seven Success Strategies
• Prospecting Phrases
• How the Pros Set Appointments
• Tax Time Prospecting Phrases
2 ANNUITY MARKETING STRATEGIES
• Why Do You Need Marketing?
• Major Annuity Prospect Groups
• Windows of Opportunity
• Dealing with Your Local Media
• Special Situations
• Safety Issue Advertising
• Radio Advertising
• Seminar Selling
• Case Histories
3 FINANCIAL & CONSUMER TRENDS
• Why Folks Cannot Get Ahead
• Baby Boomers
• Teaching Financial Planning
• Crisis in the Financial Industry
• Protecting the Estate
• Giving Good Advice
• Beating Inflation
• Additional Thoughts for Clients About
•
Retirement Planning
• Questions Frequently Asked by Today’s Consumer
4 SALES AND MARKETING TOOLS
• Overcoming the Tough Objections
• Guarantees vs. Speculation
• Insurance Industry Safety Issue
• Graphs and Charts from Selling Section
• Marketing Trouble Shooting
• Helpful Hints
• Advertising and Marketing Samples
5 RECOMMENDED READING
• Suggested Reading List
• Articles About Tax-Deferred Annuities
Success, Inc. All Rights Reserved
For Agent Use Only
SELLING ANNUITIES
H
elping prepare Americans for retirement is the business of
.the financial industry. Over the next 20 years, new and
improved wealth accumulation products will keep you, the
producer, on the leading edge of consumer demand for living
benefits, not death benefits.
The past problems of junk bonds, savings and loan failures,
real estate foreclosures and market selloffs have led to today’s
common sense and conservative investments. At the forefront
of this retirement savings revolution will be the further expansion
of tax-deferred annuity sales.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
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SELLING
ANNUITIES
What Is an Annuity?
A
n annuity is a contract purchased from a life insurance company. In
r exchange for a premium or premiums paid, the company agrees to pay
a series of payments for a specific time period or over the purchaser’s
lifetime. The premium invested with the company accumulates free from
current taxes until withdrawals are made, then the interest withdrawn is
taxed.
Although annuities have been around for decades, both agents and consumers
have misconceptions about them and their role in financial planning.
The annuity information and sales concepts that follow will help you sell
more fixed or variable annuities. The facts and figures on the next few
pages will help you and your prospect realize that annuity ownership is a
fast growing segment in the financial marketplace.
The seven "Success Strategies" in this section will help you and your
prospect learn how tax-deferred growth, probate avoidance, reducing social
security taxation and split funding apply to fixed and variable products alike.
Types of Annuities
Annuity
ownership is a
fast growing
segment in the
financial
marketplace.
There are three basic annuity types:
• Single premium - only one premium payment allowed.
• Flexible premium - allows the policy owner to determine the
amount and frequency of premium payments.
• Immediate - provides income soon after the premium payment is
made. If the annuity is purchased with after-tax dollars, then a tax
advantaged payout is provided.
Annuities can also be classified as qualified (IRA, TSA, etc.) or non-qualified for
tax purposes, depending upon usage. They may also be fixed rate - the insurance
company sets the interest rate based on its investment portfolio performance. Or,
another version of a fixed annuity is an index annuity. The index annuity provides
a minimum guaranteed return with excess interest crediting based on the movement
of an external index. (For additional non-company specific index annuity educational
information go to www.nafa.us.) There are also variable annuities where the investment
performance is tied to a specific pool of investments. Variable annuities can be described
as a mutual fund enclosed in a tax-deferred annuity.
Variable annuities are growing in popularity but should be reserved for the
more astute, securities-oriented client who understands the risk/reward
relationships in market risk investments.
Remember to be careful to explain the difference between fixed, index and variable
annuities to your prospects as there are special disclosure requirements that
pertain to the various different types of financial products you sell.
Let’s look at what has happened in the insurance industry and why.
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Annuity Facts and Figures
SELLING
ANNUITIES
According to the most recent data supplied by LIMRA International,
annuity sales continue to increase. LIMRA tracks the data from 60 of
the largest insurance companies, which represents 95% of the total market.
Following is a breakdown from the data of those companies.
• Total sales have more than doubled over the past decade.
• Variable sales have reached $134 billion, about 60% of total sales.
• Fixed rate and especially index annuity sales (which is a type of a fixed
annuity) have increased dramatically in the recent past.
• About $255 billion of sales came from these companies alone.
Total annuity sales are higher, but accurate tracking information is hard to find.
Further analysis of LIMRA data on annuity sales from these companies
only shows that:
• The average deferred fixed annuity sale is about $34,000.
• The average deferred variable annuity sale is about $44,000.
• The average immediate annuity sale is about $102,000.
• Index annuity sales reached over $23 billion in one year.
• Qualified plans are about 58 percent of total sales.
• About 19 percent of sales came from career agents.
• About 21 percent of sales came from independent agents.
• About 16 percent of sales came from stockbrokers.
• About 21 percent of sales came from banks.
• About 12 percent came from independent brokers.
• About 11 percent came from other sources. (like direct response)
•
Remember, this data is taken from only 60 companies, with some of the
data coming from even fewer as some of the factors considered in the
survey may not apply to all companies. These statistics may not be
representative of the entire industry, but they give you a good general
view of the annuity marketplace.
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ANNUITIES
These figures add to the already substantial evidence which shows a
change in America's financial spending preferences. According to
LIMRA statistics, consumers are spending proportionately less on death
benefits, i.e., life insurance, and more on living benefits, i.e., annuities.
The fact that life insurance sales remain relatively flat, while annuity sales
continue on the upswing, supports this trend. And those of us who are
marketing millions of dollars in annuities each year believe this trend
forecasts a permanent change.
Consumers
are spending
less on death
benefits and
more on
living
benefits.
T
he pre-retirement population, as well as those who have already retired,
control an enormous amount of wealth in this country.
Thirteen thousand people turn age 55 every day in the United States. Every 8
seconds someone turns 60 years old. Today’s 55-and-over population in
America:
• Owns 77 percent of all financial assets.
• Owns 80 percent of all deposits in savings and loan associations.
• Owns 80 percent of their homes, of which 55 percent have paid off
their mortgages.
• Purchases 40 percent of all new domestic cars and 48 percent of
all luxury cars.
• Purchases 80 percent of all luxury travel.
• Spends more on health and personal products than any other group.
• Watches more television than any other age group.
• Accounts for 40 percent of consumer demand.
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ANNUITIES
The Annuity Marketplace
T
he annuity marketplace has become highly specialized. You will need
to have innovative and competitive products to compete in this
dynamic industry. The annuity specialist looks far beyond commissions,
interest rates and fancy packaging when choosing his products.
You will need to
look far beyond
just ratings and
name recognition
in evaluating your
company choices.
The criteria for insurance company selection in the decades ahead will
include safe investments, sound management practices and seasoned
professionals in the field as well as in the home offices.
You will need to look far beyond just ratings and name recognition in
evaluating your company choices. You must learn how to evaluate
investment portfolios and the management behind them, whether you're
looking at a fixed rate annuity carrier or the individual accounts in a
variable annuity.
You will need to develop special skills and spend the necessary time in
discovery and fact finding to understand your prospects true needs, desires
and motivations, before ever discussing solutions and products.
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State Guarantee Funds
What are the guaranty associations?
Life and health insurance guaranty associations are organizations created
by state legislatures to protect the policyholders and beneficiaries of an
insolvent insurance company, up to specified limits. All insurance
companies licensed to write life or health insurance or annuities in a state
are required, as a condition of doing business in the state, to be members
of the guaranty association. If a member company becomes insolvent,
money to continue coverage or pay claims is obtained through
assessments of other insurance companies writing the same line(s) of
insurance as the insolvent company.
Who is protected?
Life and health insurance guaranty associations cover individual
policyholders and their beneficiaries; typically, persons protected by
certificates of insurance issued under policies of group life or group
health insurance are also covered. Limits on benefits and coverage are
established by state law. For more information about coverage, contact
the state guaranty association or insurance department in the state where
you reside.
Does it matter where I live?
All life and health insurance guaranty associations limit protection to
residents of their own states, provided the company was licensed there,
regardless of where the failed insurance company is headquartered.
What benefits are guaranteed?
State law may vary as to the dollar limitations covered by guaranty
associations. The model most states use sets basic limits of:
•
•
•
•
$300,000 in death benefits
$100,000 in cash surrender or withdrawal values for life insurance
$100,000 in health insurance benefits
$100,000 in present value of annuity benefits, including cash
surrender and withdrawal values
The overall cap for any one individual is $300,000. A few states have a 500,000 cap.
Check for the correct information in your state. For more information go to
www.nolhga.com.
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SELLING
ANNUITIES
State laws also differ as to whether the guaranty association covers all
products. For example, unallocated annuity contracts, which are contracts
purchased by retirement plans as a funding vehicle for participants , are
protected by guaranty associations in some states. When guaranteed, the
limit usually is 5 million for all unallocated group annuity contracts
issued to the contract holder, regardless of how many employees it
covers. Contact your state guaranty association or insurance department
to find out what policies are protected.
When might a guaranty association provide benefits?
Generally, a guaranty association must provide coverage when a company
has been declared insolvent and ordered liquidated by a court of law.
Before benefits can be paid, associations must receive details on who is
insured and the type of coverage issued. Guaranty associations typically
receive information from the state authorities who have taken control of
the failed company.
What happens to my insurance coverage if my company fails?
In most cases, a guaranty association will continue coverage as long as
premiums are paid. It may do this directly, or, most often, it may transfer the
policy to another insurance company. In any case, policyholders should
continue making premium payments to keep their coverage in force.
What should I do if I am notified that my life or health
insurance company has been taken over?
If you receive notice from your company’s receiver that the court has ordered
the state to take control of the company, you should not take action
prematurely. The receiver will be working with the guaranty associations to
make arrangements for continuation of coverage through a solvent insurer.
Claims will continue to be honored until and unless coverage is canceled by
you or the company.
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SELLING
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What Happens When an Insurance Company Fails
Role of the insurance commissioner The insurance commissioner, either
elected or appointed by the governor, is charged with monitoring and
regulating insurance activities within a state. The insurance commissioner
also has the responsibility to determine when an insurance company
domiciled in his state should be declared insolvent and to seek authority
from the state court to seize its assets and operate the company pending
final resolution.
Role of the receiver When the insurance commissioner obtains control of a
company, he is, by law, the rehabilitator or liquidator of the company, and
may retain someone to serve as special deputy receiver to supervise the
company’s activities. The special deputy receiver may either be an
independent professional experienced in legal, accoounting and actuarial
issues, or an employee of the state insurance department.
Role of the state guaranty association The state life and health guaranty
association, a special creation of state law, is required to protect
policyholders of an insolvent insurance company. All insurance companies
licensed to sell life or health insurance must be members. The guaranty
association cooperates with the commissioner and the deputy receiver in
determining whether the company rehabilitated ot whether policies should
be transferred to other insurance companies and the failed company
liquidated.
Guaranteed coverage Policyholders in all 50 states, the District of
Columbia and Puerto Rico are covered by guaranty associations in their
state, up to certain limits. These benefits are usually $300,000 for life
insurance death benefits, $100,000 for cash surrender value of life
insurance, $100,000 for health insurance claims and $100,000 for an
annuity. Individual coverage generally does not exceed an aggregate of
$300,000.
How coverage is funded Continued life and health coverage for
policyholders of a failed company is provided through assessments against
life and health insurance comapnies. The assessments are collected by the
state guaranty associations, who use the funds to provide continued
coverage.
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ANNUITIES
Seven Success Strategies
T
he following seven success strategies are designed to help you present
all the benefits and advantages of annuities. They have been written in
a concise format which allows you to apply them immediately. You will
discover many effective techniques in selling annuities; however, most
will be derivatives of these seven. The strategies are followed by several
prospecting phrases that you can also use immediately to generate hot
prospects to try these strategies on.
Remember to help your prospect understand the difference between
variable, fixed, and index annuities when evaluating the following concepts.
Some concepts apply to fixed annuities only. Be sure to tell your
prospect the word "growth" in the phrase "tax-deferred growth" may not
be guaranteed in some of the plans you present.
Start with the basics that apply to all annuities, then move into
specifics and plan types when your prospect has a good grasp of
general annuity knowledge.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
Success, Inc. All Rights Reserved
SELLING
ANNUITIES
S U C C E S S
S T R A T E G Y
#
1
Taxable Equivalent Yields
Tax-deferred annuities are inherently more valuable to your client because
the interest, or growth, if any, will compound tax-deferred. You must
show this major difference between your annuity and the prospect’s
taxable alternative early in the interview process.
Use the chart below to illustrate the advantages of tax-deferred investing.
Taxable vs. Tax-Deferred Yields Equivalency
Tax-Deferred Yield of:
Tax Bracket
5%
6%
equals a taxable yield of:
7%
8%
9.4%
15%
5.9%
7.1%
8.2%
28%
6.9
8.3
9.7
11.1
31%
7.2
8.7
10.1
11.6
*This chart is for illustration purposes only. No future taxes or surrender charges
are considered.
This illustrates that for a client in the 28 percent tax bracket, a 6 percent
tax-deferred yield is equal to an 8.3 percent taxable investment.
In other words your major competition, the CD, has to pay 8.3% interest
in a 28% tax bracket to keep up with your annuity at 6% interest.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
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SELLING
ANNUITIES
Fixed Annuity
rates will most
likely average
one or two
percent higher
than short
term CD rates
over a long
period of time.
Remember, when bank CD interest rates go up, your fixed annuity
company’s new money rate will also go up. In any type of future interest
rate cycle, your fixed annuity rates should always be very competitive.
History has shown that fixed annuity rates will most likely average one or
two percent higher than CD rates.
The chart also shows that the higher a person’s tax bracket, the greater the
advantage of a tax-deferred investment.
You may want to reproduce the taxable equivalent yield chart on the back
of your business cards. Then, use your card to initiate a conversation
about annuities.
Formula For Calculating Taxable Equivalent Yields
100 - Tax Bracket = X
Tax deferred Yield = Taxable Equivalent Yield
X
Example:
100 - 28% = 72
6
= 8.33%
72
Helpful Hint: Put the percentage difference in dollars and cents
for your prospect to see the difference
*This chart is for illustration purposes only. No future taxes or surrender charges are considered.
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SELLING
ANNUITIES
S U C C E S S
S T R A T E G Y
#
2
Comparison of Investment Features
Surprisingly, many consumers are not familiar with the terms “annuity”
and “single premium deferred annuity” (SPDA). Those who have
heard about annuities probably have the misconception that the
insurance company will keep the principal balance if the policyholder
dies while receiving payments from the annuity. They may be
confusing deferred annuities with immediate annuities. This
misconception creates the opportunity for you to educate the consumer.
Modern deferred annuities have many payout options, including
“interest only,” if that is all the annuity owner desires.
Today’s
annuities
are highly
flexible.
Today’s annuities are highly flexible contracts between the insurance
company and the owner. They allow tax-deferral on earnings and
perhaps an income stream, if desired, on a tax-favored basis (nonqualified plans only).
The majority of annuities sold today are held for tax-deferred
purposes to create wealth; they are not intended to provide immediate
income payments.
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ANNUITIES
The following chart helps you learn about fixed rate annuity features and
how they compare with other investments.
Investment Features Comparison Chart
Fixed Rate
Single Premium
Deferred Annuity
Money Market
Fund
Certificate
of Deposit
Corporate
Bond
Is your principal
guaranteed?
YES
NO
NO
Is your money free
from market risk and
price fluctuations?
YES
FDIC Max
($100,000)
YES
NO
YES
NO
Is your interest
free from current
income taxes?
YES
NO
NO
NO
Is your interest
compounded and
reinvested automatically
with no current
income taxes?
YES
NO
NO
NO
Can you make small
additional contributions? NO/YES
YES
NO
NO
Can you ever make
cash withdrawals
without penalty?
YES
YES
NO
YES
Do you have to pay
commissions?
NO
NO
NO
YES
Is there a provision
to provide a guaranteed
lifetime income
with additional tax
advantages?
YES
NO
NO
NO
Is there automatic
avoidance of probate
expenses and delays?
YES
NO
NO
NO
*This chart is for illustration purposes only. Always ask for specific details and disclosures on various investments.
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SELLING
ANNUITIES
S U C C E S S
S T R A T E G Y
#
3
The Real Value of Avoiding Probate
Avoiding probate is a common advantage cited in information about
annuities, and you may have even used probate avoidance as a selling
point during a presentation. But what does this really mean to your
client? This question can best be answered by understanding probate and
the costs and delays involved in its process. The bottom line is, when
paid to a named beneficiary, annuity proceeds avoid probate.
Probate is simply a legal process of transferring assets to a decedent’s
heirs as provided in their will. If there is no will, the assets will be
transferred to their heirs in accordance with state law on intestacy.
When paid to
a named
beneficiary,
annuity proceeds
avoid probate.
Community and quasi-community property must be probated if it is left in
a will to someone other than the surviving spouse. Fortunately, a few
properties do escape probate. These include the following:
• Assets held in joint tenancy.
• Life insurance and annuity policy proceeds which are not paid to the
estate of the decedent.
• Death benefits from qualified retirement trusts, Keogh plans and
IRAs in which the designated beneficiary is named.
• Assets held in a trust created during the lifetime of the estate owner,
i.e., an inter vivos or living trust.
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If the decedent left a valid will, it will be offered upon their death for
probate. The court will officially appoint an executor. If there is no will,
the court will appoint an administrator to serve in that capacity. As part
of the probate process, the executor or administrator gathers information
about the assets of the decedent, collects those assets that are subject to
probate, pays income and death taxes, gives notice to creditors and
prepares inventory and appraisals of various assets. He then makes an
accounting of these assets to the court and petitions for their distribution
to the creditors, decedent’s heirs or other individuals and organizations
named in the will. Upon approval of the court, he makes the final
distribution of the assets.
While it is open, an estate is considered a separate tax entity which files
an estate tax return and pays taxes on the probate assets until they are
distributed or until the estate is closed. The size and complexity of the
probate estate determines the duration of probate.
The executor or administrator works at all times under the supervision of
the probate court. All distributions and expenses of probate have to be
approved by the court. On final distribution and transfer of all probate
assets, the court discharges the executor or administrator.
The advantages of probate are:
• Heirs and beneficiaries of the estate are protected by the court.
• Assets are transferred in an orderly and open manner as
approved by the court.
• No questions arise regarding the validity of the transfer of an
iiiiiiiiassets’ title.
• Questions and disputes regarding the distribution of the estate are
iiiiiiiisettled under the supervision of the court.
• Creditors can make claims against the estate only for a limited time.
aaaaaThis time period varies from two to six months, depending on the
aaaaastate of the decedent’s domicile, after which the claims of the
aaaaacreditors are cut off.
• While the estate is in probate, it is considered a separate taxpaying
iiiiiiiientity, and with skillful planning, certain tax savings can be realized.
• Costs of probate are deductible for income tax purposes.
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The disadvantages of probate are:
• Probate is an extremely costly manner of transferring a decedent’s
iiiiiiiiassets to their heirs.
• Probate can be a very time-consuming process.
• Probate court proceedings are inherently inflexible.
• Probate proceedings are a matter of public record. There is no
iiiiiiiiprivacy when an estate goes through probate.
The probate-free
benefit of
annuities is a
powerful
sales tool.
By one estimate, the legal fees for probate in this country probably exceed
$2 billion per year. Added to that is an almost equal dollar amount for
executor fees. The amount of time it takes to probate a will, before the
heirs can claim the property which they will inherit, would stagger your
imagination. The minimum period is about eight months, but it’s not
uncommon for an estate to be in probate for two years or more. In
extreme cases, estates have remained in probate until the heirs have died.
When the time and money involved in probating an estate is properly
explained to an annuity prospect, the probate-free benefit of annuities
becomes a powerful sales tool. Probate can often cost 5 or 6 percent of
the estate’s total value. Make sure your prospect is aware of the fact
that probate can cost thousands of dollars on larger estates and can take
many months to complete. The disadvantages of probate far outweigh
the advantages.
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ANNUITIES
S U C C E S S
S T R A T E G Y
#
4
The Real Power of Tax-Deferral
Now that you are able to explain and show visually the advantages of taxdeferred vs. taxable alternatives, you are ready to illustrate the dynamics
of triple compounding.
Triple compounding is one of the most amazing financial comparisons
you can utilize to attract annuity premiums. With triple compounding,
your client earns:
• Interest on principal.
• Interest on interest.
• Interest on tax savings.
(Because your interest is free from current taxes, it can all
continue to compound instead of part being withdrawn for
tax payments.)
Remember to explain the differences between variable and fixed
annuities. You may want to use triple compounding to explain fixed
and index annuities only, as some variable annuity accounts have market
risk. These risks could effect the results of triple compounding.
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Triple Compounded Interest Earnings
on a $100,000 Investment
Years
Invested
100,000
6% interest
$100,000
8% interest
$100,000
10% interest
1
106,000
$108,000
$110,000
5
133,823
146,933
161,051
10
179,085
215,892
259,374
15
239,656
317,217
417,725
20
320,713
466,096
672,750
25
429,187
684,848
1,083,471
30
574,349
1,006,266
1,744,940
This chart is for illustration purposes only. It is intended to help you understand the effect
of compounding interest without withdrawing a sum to pay current taxes. Future taxes
would still have to be paid at some point. Rates of return are hypothetical and not
guaranteed. They should be used for comparison purposes only.
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SPDA vs. CD
on a $100,000 Investment
SPDA 6%
interest
SPDA 8%
interest
CD 5.75%
interest
Less 28%
Tax Bracket
1
106,000
$ 108,000
$ 104,140
5
133,823
146,933
122,486
10
179,085
215,892
150,029
15
239,656
317,217
183,765
20
320,713
466,096
225,088
25
429,187
684,848
275,702
30
574,349
1,006,266
337,697
35
768,609
1,478,534
413,633
40
1,028,572
2,172,452
506,644
45
1,376,460
3,192,045
620,570
50
1,842,014
4,690,161
760,114
55
2,465,030
6,891,386
931,036
Years
Invested
This chart is for illustration purposes only. It is intended to help you understand the effect of
compounding interest without withdrawing a sum to pay current taxes. Future taxes would
still have to be paid at some point. Rates of return are hypothetical and not guaranteed. They
should be used for comparison purposes only.
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Enhanced Growth with a Bonus Annuity
As an incentive to attract money, many companies today are offering an
annuity with an up-front bonus of 1 to 10 percent in addition to the current
first year interest rate. Bonus arrangements normally assume the insurance
company will be able to keep the money long enough to make it profitable
for them and will then be able to pay the account back to the owner
systematically over a minimum of five to 10 years.
When bonus
annuities are
used properly,
their overall
interest rate,
including bonus,
should average
among the
highest rates
available.
You will have to determine for yourself if this type of annuity is
appropriate for your client. If the client needs a stable source of monthly
income over a long period of time, then bonus annuities are ideal for the
deferred contract side of the split-funding concept in Success Strategy # 6.
Bonus annuities are especially relevant for qualified plan distributions
(IRA, Keogh, Pension, etc.) through which a stable monthly income is
the goal.
The bonus annuity concept is designed to work most effectively when the
policy owner uses the annuity as an annuity was originally envisioned—
as a single or series of premium payments later used to generate an income
stream. Annuities were never intended to be short-term savings accounts
that could be moved from company to company in search of the highest
rate. When bonus annuities are used properly, their overall interest rate,
including bonus, should average among the highest rates available at any
given time.
For those clients who want a high interest rate plus tax deferral and a
future income stream, the bonus annuity is an excellent savings vehicle.
Unlike CDs or money market funds, whose earnings are subject to income
taxes every year, the annuity incurs no income taxes until money is
actually paid out.
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S U C C E S S
S T R A T E G Y
#
5
Reduce Social Security Taxation
Here’s a common catch-22 for the newly retired prospect: He may have
as many as 20 to 30 years in retirement and rising medical costs to
finance. His earning potential from investments, or even from consulting
work or a new job, could be as much as his pre-retirement income. Yet
the more he earns, the greater chance Uncle Sam will tax his Social
Security benefits.
Clients will look
to you to help
find ways to
continue to earn
for tomorrow
while avoiding a
Social Security
benefit reduction
today.
This alone could be one of the most important considerations when you
work with post-65 clients. They will look to you to help find ways to
continue to earn for tomorrow while reducing or avoiding a Social
Security benefit reduction today.
When your client has income over about $30,000, he or she may have to
include the majority of his or her Social Security benefits in his income
for tax purposes. Check with an accountant for the precise formula as it
may change from year to year.
The formula for determining excess income requires that all earned
income and any tax-exempt income from municipal bonds is reported.
So, don’t let a prospect tell you that “muni bond” income is tax-exempt.
Tax-deferred interest, however, is a different story and can come to the
rescue. The IRS regulations do not require that tax-deferred interest be
included in the formula.
This situation makes annuities an ideal vehicle to work into your client’s
long-term planning. He can convert some of that interest from taxable to taxdeferred by repositioning assets to one of your deferred annuities. This in
turn will reduce the income tax he must pay on his Social Security benefits.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
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S U C C E S S
S T R A T E G Y
#
6
Split-Funding Approach to Provide Income
Today’s annuities are not just for wealth accumulation. They can provide
an excellent source of tax-favored income. The following worksheet
illustrates the advantages of combining an immediate and a deferred
annuity in the split-funding technique to generate a tax-favored monthly
income instead of a fully taxable income from a CD.
As an example, I have used $100,000 earning 7 percent interest. The
technique is to match the same gross income (CD vs. annuity), i.e.,
$7,000 per year.
A Plan to Produce Immediate
Tax-Favored Income and Tax-Deferred Growth
Original Premium
$100,000
split in the following manner
Amount to Immediate Annuity
To Provide Tax-Favored Income**
Amount to Deferred Fixed Rate
Annuity to Grow Tax-Deferred*
$29,750
Current
Interest Rate
$70,250*
7.35%
Guaranteed Monthly Income
Payable for 5 years
$583
Guaranteed Annual Income
$7,000
85% Tax Free***
5 years
Tax-Deferred Compounding
Will Grow To
Guaranteed Total Payout
$35,000
+
$100,151.29*
Total Return:
=
$135,151.29
* The above calculation is based on the current interest rate. Ask your representative for current rates and guarantee periods.
** The illustrated annuity income is based on current immediate annuity purchase rates which are not available indefinitely. Actual income will be in accord with the published rates
*** in effect at date of issue.
*** These figures are based on the assumption that the amount to be annuitized shown above is the tax basis of the policy.
*** NOTE: The tax results herein are based on interpretations of current tax law. There can be no assurance that these interpretations will prevail or that changes in tax law will not
*** affect the results shown. Always consult your professional advisor on matters of taxation.
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In the
split-funding
technique,
deferred annuities
are tax-deferred,
so only the
interest portion
of the immediate
annuity is taxable.
In a 28 percent tax bracket, the immediate annuity produces $558.83 per
month net after tax vs. the CD’s $420.00 net after tax over the next five
years. The annual tax-free exclusion ratio on the immediate annuity is 85
percent. Why? Because the insurance company is returning principal and
interest over the next five years from the immediate annuity. The
deferred annuity is growing tax-deferred, so only the interest portion of
the immediate annuity is taxable. Remember, principal is not taxed in a
non-qualified annuity, just the earnings.
Your sole objective is to provide an income that is greater than or equal to
the one your client presently has. The difference is, your plan is 85
percent tax-exempt, providing more spendable income each month. This
income could be reinvested in other products you offer, including life
insurance, health insurance, medical supplements, nursing home plans,
mutual funds, etc. Millions of dollars worth of annuities are sold each
year from this concept alone.
The above concept illustrates a fixed rate annuity being used on the
deferred side, but many agents use various combinations of variable
annuities and fixed annuities on the deferred side.
Keep a copy of the current year’s National Underwriter’s Tax Facts book
handy. It contains the formulas you will need to calculate the exclusion
ratios. You can call your company to get their current five year certain
immediate annuity payout rates. Ask your company’s marketing
department for assistance with this concept. They should be on top of the
latest split-funding strategies and any tax law changes that could affect
their use.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
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S U C C E S S
S T R A T E G Y
#
7
Perception vs. Reality
With this strategy you can improve your prospect’s after-tax spendable
income. When you compare CDs and annuities, the tendency is to focus
on the value of each at the end of a specific time period. Just to be fair,
you usually deduct the income taxes the prospect would pay on the
annuity to give a valid after-tax comparison. But I have found that you
shouldn’t do it this way!
The perception is, people should use this after-tax comparison to judge
how much more valuable the annuity is than the CD.
The reality is, most people are saving or deferring to provide themselves
a future income stream. The real comparison or question should be:
Which savings vehicle, CD or annuity, will provide the greatest future
income stream?
Concentrate on the concept described on the following page. Don't worry
about current interest rates and tax brackets, as they will change from year
to year. For illustration purposes, we will even assume the CD and the
annuity are paying the same rate. This will further accentuate the power
of tax-deferred growth.
Let’s take a look at the real value of the tax-deferred compounding
of interest.
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Assuming a 31 percent tax bracket, $100,000 at 8 percent interest for 10
years in the CD grows to $171,139. Invested in an annuity, the $100,000
grows to $215,892 because of tax-deferral.
Would your client rather have $171,139 earning interest or $215,892? If
your client withdraws 8 percent interest each year thereafter, the after-tax
income in the annuity will be 26 percent higher than that of the CD.
$100,000 at 8%
CD
Year
10
15
20
CD
Value
$ 171,139
223,883
292,884
Income
(8%)
After-Tax
Income
$ 13,691
17,911
23,431
$ 9,447
12,358
16,167
ANNUITY
Annuity
Value
Income
(8%)
After-Tax
Income
%
Increase
$ 215,892
317,217
466,096
$ 17,271
25,377
37,288
$ 11,917
17,510
25,728
+ 26%
+ 42%
+ 59%
*Note: The tax results herein are based on interpretations of current tax law. There
can be no assurance that these interpretations will prevail or that changes in tax
law will not affect the results shown. Always consult your professional advisor on
matters of taxation.
The compounding of interest will have an enormous effect on your
client’s future income stream. The longer the period, the more dramatic
the effect. Using the above chart assumptions, the difference increases to
about 42 percent after 15 years and 59 percent after 20 years.
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Rule of 72
This may be a good place to utilize the Rule of 72.
You probably know how this formula works, but your client may not.
Tell him that time is money and tax-deferral buys time. The more time he
can buy, the faster his money can grow.
The Rule of 72 states: By dividing the rate of return on an investment
into 72, the result will be the number of years it will take for an
investment to double.
72 ÷ Rate = Years to Double Money
For example, an 8 percent tax-deferred plan will double in nine years. A
taxable CD earning 8 percent, less 28 percent in income taxes, doubles in
12.5 years, because the net after-tax rate is only 5.76 percent. The smart
money always goes to the shortest time period.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
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Annuities vs. CDs
This perception vs. reality strategy will become very useful to you as
you notice the majority of your prospects have bank CDs. You need to
know your competition. By understanding the key reasons your annuity
out-performs a CD, you will be able to consistently turn those CD owners
into clients.
Repositioning a CD
to a tax-deferred
annuity avoids the
current taxes and
should give the
client a positive rate
of return in excess
of the current
inflation rate.
The previous strategies outline the approaches to use. This strategy reaffirms the earning power that is lost if funds destined for retirement
purposes remain in CDs. Core savings left in CDs may never match core
savings transferred to annuities in their ability to accumulate the most
dollars for later use.
Any presentation of CDs vs. annuities should also contain a discussion of
the ravaging effects of inflation. When you subtract inflation and taxes
from the return on a CD paying 4 to 5 percent, you could have a negative
rate of return. Repositioning that CD to a tax-deferred annuity avoids the
current taxes and should give the client a positive rate of return in excess
of the current inflation rate.
The following charts will help your prospect better understand the cost of
liquidity involved when he chooses a CD over an annuity. Ask your
prospect if he wants to pay an ongoing penalty by accepting the lower rate
and current tax liability from the CD.
Real Return on a CD
The actual percentage returned on a Certificate of Deposit after taxes and less inflation.
CD Rate
Less
Taxes of
Less
Inflation
Rate of
Actual
Return
8%
7
6
5
4
28%
28
28
28
28
2%
2
2
2
2
3.76%
3.04
2.32
1.6
.88
* This chart is for illustration purposes only. It shows hypothetical examples of various CD
rates and takes into consideration the tax and inflation effects on the rate of return.
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Historical data from the Federal Reserve shows CD rates have consistently
averaged lower than fixed annuity rates. Help your prospect understand that a
tax-deferred annuity earning only a 1 percent higher rate than a CD will give
him a total annual compounding advantage of about 3 percent if he is in a 28
percent tax bracket. Put the percentages in dollars and cents. For example, a
3 percent advantage on $50,000 is worth $1,500 per year.
Remember, most people are accumulating a nest egg for retirement Obviously
taxes will have to be paid in the future on both the CD and annuity, but the
annuity will grow the nest egg much faster if it averages a higher rate year
after year and it grows tax deferred.
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The Cost of Liquidity
CD
$50,000
ANNUITY
$50,000
Year 1
5%
$2,500.00
$52,500.00
6%
$3,000.00
$53,000.00
Year 2
5%
$2,625.00
$55,125.00
6%
$3,180.00
$56,180.00
Year 3
5%
$2,726.25
$57,881.25
6%
$3,370.80
$59,550.80
Year 4
5%
$2,894.06
$60,775.31
6%
$3,573.05
$63,123.89
Year 5
5%
$3,038.76
6%
$3,787.43
Total
$63,814.08
Total
$66,911.28
Advantage over CD
+$3097.20
*This chart is for illustration purposes only. No future taxes or surrender charges
are considered.
Show your prospect that buying one year CD's, hoping rates will increase
each year can be a losing proposition. Taxes are not taken into consideration
in this example.
If an annuity averages 1 percent higher and the prospect is attempting to
build a nest egg to generate a future income stream, then a small 1 percent
difference in compounding rate can make a significant difference.
The advantages become even more significant when taxes are subtracted
each year from CD’s growth but are allowed to be deferred in the annuity
and only paid when the income stream starts.
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Prospecting Phrases
T
he following power phrases are guaranteed to make your suspect
become a prospect and then a client.
I suggest you ask your potential prospect one of the following questions:
“Are you still paying taxes on your CD?” When he says yes, show him the
taxable equivalent yield benefit chart in Success Strategy # 1. Follow up
with the comparison of investment features chart in Success Strategy # 2.
“Are you using your CD interest to live on?” There are only two
possible answers. If he says yes, you explain, “My company has a plan
that will give you the same monthly income, but with an 85 percent
tax-exemption. Are you interested?” This leads you directly into the
split-funding approach from Success Strategy # 6.
If he says no, you say, “Then you should be taking advantage of the triple
compounding of interest.” Move directly to the power of tax-deferred
compounding from Success Strategy # 4 and illustrate with the graphs of
the benefits he has been missing.
“When does your next CD come due?” This single question has
generated more sales by more insurance agents and brokers than any of
the others. There are only three answers:
“I don’t have one.” End of interview. Try to sell your prospect
something else, perhaps an IRA rollover or another product you offer.
Also, don’t forget to ask for a referral.
“I don’t know.” Good. You’ll have him thinking. Ask him to call you
with the date, or offer to call him within 24 hours.
“Well, let’s see, next Tuesday.” Great. This is a live one. Go to work
and show him what Moneytalks has taught you.
Start applying these success strategies and prospecting phrases
immediately. You will find many people with money ready and willing to
learn about a good alternative to the low paying CD they most likely
have. Regardless of where the prospect has his money invested, the
benefits of annuity ownership are very appealing. Use the phrases to find
your prospect and then show him all the great reasons he should want to
buy an annuity from you.
Good Selling!
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How the Pros Set Appointments
Salespeople have been taught to push hard for the appointment by immediately
asking for a time and date with a prospect. They are taught to say, "Would
Tuesday at 7:00 or Wednesday at 8:00 be better for you?" This is effective,
but most of the time agents ask this question before they have emotionally
intrigued the prospect or taught him anything new and useful to improve his
life.
The prospect is thinking, "Why would I possibly be interested in using up my
valuable time listening to a sales pitch about something I have all these
negative feelings or misconceptions about?" Or, "Why is this salesperson or
his ideas any different than any other salesperson who is trying to get my time
and money?"
Here is a classic example of the salesperson attempting to get in front of an
annuity prospect:
"Mr. Prospect, I am Joe Agent and I have been in the insurance business for 15
years here in the greater ABC city area and I would like to get together so I
can show you how a tax-deferred annuity could really enhance your retirement
savings. Would 7 p.m. Tuesday be a good time for us to meet, or would 8 p.m.
Wednesday be better?"
In this example the salesperson has made several crucial mistakes that are
severely limiting his success at setting appointments. He started with saying
"I" several times, which insinuates how wonderful "I" the salesperson is and
how greatly the community has benefited from his presence all these years.
This is how the prospect can view this initial dialogue. The prospect is far
more interested in his personal problems, his concerns and his wants than how
good the agent may be.
Salespeople have been programmed for years to tell their prospects how great
and powerful their company is and how wonderful their products are and how
everyone really needs them. They also tell about their years of education and
service to build credibility, but they are using all of these attributes at the
wrong time in the sales process.
There is no doubt that these attributes build the prospect's confidence in you
and your company an your ideas, but they need to be brought out after the
prospect's emotions have been touched and his wants and desires and needs
have been discussed.
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Following is an approach that will more likely entice your prospect to agree to
an appointment. Unlike the above classical approach, we get inside the mind
of our prospect and touch on his concerns instead of the salesperson's.
"Hello Mr. Prospect, this is Joe Agent. If you have a moment and would like to
learn how millions of Americans have stopped paying current income taxes on
their interest earnings, my company will send you a free, no obligation
videotape describing this simple, legal method for you."
Now instead of "No, thank you," the prospect may say, "How have they
stopped paying current income taxes on interest earnings?" You now have
intrigued the prospect and started a dialogue that allows you to teach
something new to your prospect. This will build credibility with the prospect.
You can move into a brief discussion of annuities that will bring out a couple
more questions or misconceptions the prospect has, which you can answer in a
low-key, friendly discussion with someone who is now interested in learning
more.
You now have the right to ask for an appointment where you might bring over
a video or audio tape or a report or brochure that will help the prospect learn
more about this interesting, new concept they just found out about. Your
prospect can learn about this exciting idea without pressure, simply by
watching their TV or listening to a non threatening tape player or looking over
a simple paper brochure or report.
If the prospect agrees to an appointment, feel free to lay out the agenda for the
prospect to ease their mind that there will not be a high pressure sales situation
by saying, "After the video we will take out a blank sheet of paper and find out
what's important to you, what you want your money to do for you, what your
goals are for your money and see if this exciting new idea fits into your plans."
If the prospect hedges on setting an appointment, you can use the above
statement as a close to get the appointment.
If you have an office, ask the prospect to come to your office by saying, "Mr.
Prospect, I have a variety of interesting financial information resources
available at my office that will assist you in evaluating options available to
you. Consequently, I'd like to set a time to meet at my office so that once you
view the video, we'll have these resources on hand." Ask for daytime
appointments as people can usually find time during the week to see you.
You will find it much easier to get appointments when you learn to use these
techniques in your phone calls as well as in any marketing or advertising
approach you may be using. Remember to catch their attention with a
powerful emotionally charged phrase that appeals to their wants and desires.
Then teach them something new so they will become interested in learning
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more from you. Follow this up with an offer for something free with no
obligation or pressure to discover more about your interesting idea.
Make it easy to do business with you by offering an easily accessible office
location, free information or a no-pressure video or audio tape presentation, an
offer to do a free analysis of their future financial needs and requirements, or
the offer to come to their home or place of business.
Get inside your prospect's mind; think like your customer, evaluate your phone
script, presentation, personal letters and everything you think, do and say as if
you were a prospect.
To help formulate your scripts, ask your existing clients, "Why do you do
business with me? Why did you agree to an appointment with me initially?
What other services, information or assistance would you like me to provide?"
This process will help you determine your strengths and weaknesses, as well as
determine what products and services you may want to offer in the future. It
will teach you how to become unique and demonstrably different from your
competition.
Marketing must become your first priority. It involves all levels of your
business from the way you begin a conversation to the way you follow up after
delivering a policy. If you want to dramatically increase your success in
getting appointments and closing more sales, you should spend more time on
evaluating your market and the best way to approach it. In fact, you should
spend far more time in the discovery and follow-up segments of your sales
approach than you do in presentation and close segments.
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BONUS
FEATURE
"TAX TIME" Prospecting Phrases
Do you know what questions to ask your CPA this year when you
meet with him to work on your tax return?
This simple phrase is a great proven door opener to get prospects to
open up and talk with you about tax savings and the benefits of tax
deferral using annuities. It can also become part of any marketing piece
wording. People usually don't know what questions to ask their CPA or
how to "look forward" with their tax planning. Learning how to lead into a
discussion about tax deferral, social security taxation and other important
tax issues is a great way to get many new prospects.
There are several important things to discuss with your accountant
that could lower your taxes or eliminate or reduce taxes on your
Social Security as well as possibly increasing your rate of return
and increasing your safety on your investments.
♦ Do you use all or part of your line 8 interest income to live
on?
♦ How much would you have to reduce your income to stop
or lower taxation on your Social Security income?
♦ Are you taking the proper minimum distribution on your
IRA or other qualified plan if you are over age 70 and ½?
♦ Do you have phantom income from mutual funds?
♦ Are you aware of the formula that determines how much
of your Social Security will be taxed?
♦ Were you aware that tax free municipal bond income is
used in the calculation to determine how much of your
Social Security will be taxed?
♦ Do you know what solutions are available to help reduce
taxation of your interest income or Social Security?
♦ Do you know how to increase the rate of return on your
safe or emergency money?
♦ Were you aware that millions of Americans have legally
reduced or eliminated taxation on their interest and or
Social Security income?
These are just a few of the questions that need to be discussed
before meeting with your CPA or accountant this year.
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For Agent Use Only
ANNUITY MARKETING
STRATEGIES
T
his section has been designed to enhance and clarify
proven marketing methods and actual advertising
copy that has consistently generated a steady stream
of hot annuity prospects.
These techniques can be applied to all forms of marketing,
from mail pieces to telemarketing scripts or television ads to
billboards. Marketing is everything we do from the way we
prepare our advertising messages to the way we answer our
phones.
This section and our exclusive Marketing Trouble Shooting
module in the Sales And Marketing Tools section will help you
determine which direction you want to take in marketing your
business, and how to start preparing a new marketing plan or
fine-tuning your existing one. Our customers are applying
these concepts in a wide variety of methods and producing
dramatic results. Some are running newspaper ads, some are
using radio ads, some are implementing telemarketers,
some are giving seminars, and many are using other forms
of advertising such as mailers, flyers, billboards, television
ads, radio programs, trade shows, and the list goes on.
By learning how to identify small mistakes in their
marketing efforts, they are all improving the way they
promote their business and bring in new prospects. With a
powerful marketing campaign in place, these agents are now
having hot annuity or other insurance plan prospects either
call them, walk into their office or respond to their
marketing strategies at a much higher rate than before.
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ANNUITY
MARKETING
STRATEGIES
Why Do You Need Marketing?
M
arketing is necessary because you must run your insurance business
ilike a big business! This involves the following objectives:
• Setting goals
• Exercising proper time management
• Identifying your target market
• Analyzing your competition
• Understanding your strengths and weaknesses
• Projecting your image to your market
• Using results-oriented advertising
Since you can take many continuing education courses concerning most
of these topics, I won’t dwell on each subject. However, I will briefly
discuss these objectives to demonstrate their importance to your
marketing plan.
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Setting Goals
From every inspirational speaker you have heard to every motivational
book you have ever read, setting goals has probably been the most
important concept you have learned. Top producers and successful
businesses do set goals. I, too, believe that goal setting will help you in
all aspects of your life. Remember, a goal is a dream with a deadline. If
you have dreams, simply write them down, put together a plan to reach
those dreams and set a time limit in which to accomplish them. If you
follow this formula consistently, chances are, you will be happier,
wealthier and even wiser just by using a goal setting process.
Exercising Proper Time Management
Time management involves not only the way you schedule your
commitments during the day but also the way you delegate jobs to others
and how you use your time after prime selling hours. Don’t clutter your
best sales time with paperwork and cold calling. Your time is valuable, so
use it wisely to sell your products.
Identifying Your Target Market
Proper market identification is crucial for targeting your marketing and
advertising plans to your intended prospects. If you know your average
prospect’s age, income, tax bracket, attitudes and personal concerns, you
will have the keys to reaching your prospects most effectively.
Analyzing Your Competition
To determine what makes you different, analyze what your competitors
are selling as well as how they are advertising their products and services.
You can then promote this difference to separate yourself from the pack.
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Understanding Your Strengths and Weaknesses
By identifying your strengths, such as having industry educational
achievements, being a product specialist or having years of experience,
you will know what to promote about yourself and your business.
Knowing your weaknesses will reveal what to avoid until you can learn
more about that particular area.
Projecting Your Image to Your Market
Understanding your ideal prospect will help you create the image for your
products and services. When selling annuities, you will discover that a
very conservative, well-established and secure image is best. This image
will encourage the age 50-plus prospects to come to you for solutions to
their problems. By knowing the desires and concerns of your ideal
prospect, you can prepare and project that proper image.
Using Results-Oriented Advertising
Now that you know your strengths, your market is well-focused and your
image is put together, you can begin marketing to reach those prospects.
Results-oriented marketing is the process of designing your marketing plan
using a combination of emotional appeal and response generating techniques.
This differs from what some call "institutional style marketing or advertising
techniques." Simply running ads with your picture and name in an effort
to promote name recognition rarely works in the financial industry.
Targeting your message and creating a desire in your prospect's mind is the
way to apply a results-oriented response generating marketing plan. This
requires a powerful emotional appeal and a "call to action" that generates
response. This is the most difficult area for financial professionals or any
business attempting to sell more of its products or services.
In writing your marketing pieces, you must think like your prospect.
Creating and writing good marketing pieces or advertising copy is where
the errors that limit or kill your marketing results are consistently made.
The Sales And Marketing Tools section shows you how to avoid the
mistakes most agents make in their marketing plan and gives you the key
ingredients a successful marketing piece must contain.
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Major Annuity Prospect Groups
N
ow let’s look at the four major annuity prospect groups you will
itarget with your advertising and marketing efforts.
New money prospects include those prospects who have:
• Maturing CDs
• Money market accounts
• Savings accounts
• Mutual funds
• Bonds
• Stocks
• Inheritances
• Proceeds from real estate sales
• Court settlements
• IRAs and other qualified money
• Pension plan distributions
Old annuities prospects are those prospects who may have:
• An agent who has moved or is deceased
• No service available in their area
• Safety concerns
• Low interest rates
• Annuities they are unhappy with
Newly informed prospects are those prospects who have been given an
annuity presentation by an:
• Agent
• Banker
• Stockbroker
• Financial Planner
Every day these salespeople make annuity presentations, increasing the
pool of interested annuity prospects for you to market to. You can
convince prospects to shop around and get a second opinion. Or offer
them free information for comparison purposes.
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Your current client prospects are annuity prospects who may be:
• Life insurance clients
• Health insurance clients
• Long-term care clients
• Living trust clients
• Medicare supplement clients
• Financial planning clients
• Mutual fund clients
• Property and casualty clients
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Windows of Opportunity
T
hroughout the year, many “windows of opportunity” open, allowing
you to capitalize on and advertise for annuity prospects.
The major window of opportunity you can always take advantage of
involves the simple fact that fixed annuity interest rates are usually 1 to 2
percentage points higher than the rates of your largest competitor, bank CDs.
This important percentage difference is simple to advertise and easy for your
prospects to grasp. Properly constructed, an advertisement that promotes
your annuity at an interest rate higher than your competition's will definitely
attract a prospect’s attention and provoke inquiries. This percentage rate
difference will attract potential clients in the new money prospect group as
well as prospects in the newly informed group.
The word “free”
is the most
powerful and
successfully
used term in
advertising.
Another window of opportunity opens each time you are notified that
your interest rates will be lowered on a set date. You can now run a
newspaper advertisement that motivates prospects to call now to lock in
the current rate before it drops. This also encourages your current clients
and hot prospects to beat the deadline.
The insurance industry safety issue also provides a large window of
opportunity. In your advertisements, include an offer for free safety
analysis of annuity products. You can provide informative brochures or
even cassette taped information by professional financial experts.
Remember, insurance agents, stockbrokers, bankers and financial
planners make annuity presentations every day. The agent who advertises
free information or consultations about the safety issue will convince
prospects to shop around for better products and safer companies.
The word “free” is the most powerful and successfully used term in
advertising. You don’t need to bash another agent or company to get
clients. Free information that is factual and easy to understand will be
deeply appreciated by concerned prospects. Your positive attitude about
the safety of the insurance industry and your willingness to help prospects
understand the facts will win them over time and time again.
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This technique is very effective in attracting prospects from the old
annuity owners group as well as prospects from the new money group
who are currently considering an annuity. A prospect with an old annuity
may want to receive your free information to reaffirm his belief in his
original decision, and he may have additional money to invest.
A free cassette taped interview about the safety of the insurance industry
and the benefits of owning annuities can successfully open many
windows of opportunity. A tape will accomplish several things for you.
It will put all other agents to work for you. They are making annuity
presentations daily while you are advertising that the public should not
buy annuities or transfer existing ones until they receive your free tape.
It will also get your presentation in front of many people who weren’t
willing to set an appointment with you. They will probably be glad to
listen to a tape because there is no sales pressure.
A free cassette
taped interview
about annuities
is a powerful
referral builder.
The tape is also a powerful referral builder. How many times have you
asked for names of referrals and walked away with none? People are
glad to share your tape with their friends. Now your taped presentation
of the issues and your name and phone number are being presented to
more and more people. The more tapes you hand out and send out, the
more salespeople you have working for you, and you don’t have to pay
them a commission.
Your current client list provides a constant open window of opportunity.
Your clients already believe in you, so you’ve overcome one of the
toughest objections. Call them or write to them and make your annuity
presentation. If they have money in CDs or other investments, one of
our seven success strategies for selling annuities should help you sell
them an annuity or two.
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Dealing With Your Local Media
N
Newspaper and
radio are
usually the most
cost effective
media in which
to advertise.
ow that you have made the decision to advertise to attract hot
iprospects during all the windows of opportunity open to you, you need
to become familiar with samples of actual proven newspaper and radio
advertising ideas. I will concentrate on these two media since they are
usually very cost effective. Following this discussion, I will also give you
pointers on the placement of your ads and some additional cost saving
techniques. You can spend hours in marketing seminars designing your
own marketing plan and advertising copy, or you can simply take the easy
route and use our ads in your local media by inserting your business name,
address, phone number and product. These ads have been very successful
in generating hot prospects in many cities around the country. However,
don’t be afraid to enhance and improve them through your own testing.
The following example is a sample of an effective newspaper ad. It helps you
see the general structure of an ad that has the right elements in a compact format.
Remember, these ads are provided to help you
understand effective concepts only. Your final
advertisement or marketing piece may be quite
different from these examples.
See the Sales And Marketing Tools section on
promoting and advertising a variety of
different concepts. There are many ways to
advertise that do not require interest rates or
product names, thus easing compliance issues.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
CDor IRA
Maturing?
How About
0.00%
*
1 Year Guaranteed
Principal & Interest Guaranteed
Call for more details
000-0000
or 1-800-000-0000
NO OBLIGATION
Your Business Name
Your address
*Include disclosure statement about your product
supplied by your company.
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This ad has also been directly responsible for generating thousands of
dollars in commissions from new IRA deposits and large IRA and other
qualified plan rollovers.
Due to the large increase in IRA and other
qualified plan rollovers, we now include
an IRA tagline in most of our marketing
pieces year round.
CD or IRA
Maturing?
How About
0.00%
*
Guaranteed 1 Year
CALL NOW FOR DETAILS
000-0000
or 1-800-000-0000
NO COST OR OBLIGATION
XYZ FINANCIAL SERVICES
456 SOME PLACE, SUITE 105
ANYWHERE, USA 12345
*Include disclosure statement about your product
supplied by your company.
Helpful Hint - If you find a hot prospect
with a large qualified rollover, he may give
you several referrals of his fellow workers
who are also receiving qualified
distributions.
CD or IRA
Maturing?
How About
0.00%
*
Guaranteed 1 Year
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
CALL NOW FOR DETAILS
000-0000
or 1-800-000-0000
NO COST OR OBLIGATION
XYZ FINANCIAL SERVICES
456 SOME PLACE, SUITE 105
ANYWHERE, USA 12345
*Include disclosure statement about your product supplied
by your company.
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Special Situations
I
f you receive notice that your company is dropping its annuity interest
irate, call the newspaper and add a notice to the top of your regular “CD
Maturing?” ad.
A half-inch tag on top of the ad consistently
generates panicky, last minute, hot prospects
and also motivates your existing clients to stop
procrastinating and call you.
Helpful Hint - The moment you receive notice
of a rate drop, call the paper to include the rate
drop in your ad. Then call every hot and warm
prospect you’re currently working with to help
them quickly make the decision to avoid
missing out on the current higher rate.
Always explain the delay in dollars and cents.
If they receive a .5 percent lower rate over the
next year, they lose $250 on a $50,000 deposit.
Conservative annuity customers don’t like to
lose $25, let alone $250. Make them aware of
the numbers and motivate them to meet with
you soon.
Notice: This rate will drop 12-1-2006
LOCK IN TODAY!
CDor IRA
Maturing?
How About
0.00%
*
1 Year Guaranteed
Principal & Interest
Guaranteed
Call for more details
000-0000
or 1-800-000-0000
Your Business Name
Your address
*Include disclosure statement about your product
supplied by your company.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Safety Issue Advertising
T
he so-called “insurance industry crisis” gives you the opportunity to
use the powerful “free” word in your advertising. Now you can give
away free consultations and free information. The method I have found
to be most successful is an offer for a free cassette taped interview about
annuities and the safety of the insurance industry. Following is a sample
of this application.
See the sample ads in the Marketing
Troubleshooting Section for a variety
of methods to distribute tapes and
information. These ads attract hot
prospects with new money, prospects
who have just learned about annuities
or prospects who have old annuities
they are unhappy with.
IS YOUR
ANNUITY SAFE?
DON'T buy an annuity until
we mail you a FREE cassette tape
about guaranteed annuities and
the life insurance industry by
award-winning consumer
advocate Paul Strassels.
- Learn how to tell if the insurance
company is safe!
- Learn how the Life Insurance
- Industries' Legal Reserve System works!
- Learn what to do if you're not satisfied
with an annuity!
Call now for your free tape
Toll free 1-800-000-0000
Local calls 000-0000
Your company name
and address here
*Include disclosure statement about your
product supplied by your company.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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This new concept has been used for years now with great results.
Annuity salespeople are using seminars, radio and newspaper ads,
mailers, trade shows and a variety of other methods to distribute tapes or
other information. Thousands of tapes have been mailed or handed out,
and the prospects have even passed the tapes on to their friends and
relatives. A few prospects have actually walked in after listening to the
tape and have simply said, “OK, I would like to buy an annuity.” Sounds
ridiculous, but it’s true.
A well put together taped presentation that overcomes all the tough
objections and explains annuities thoroughly is a tremendous tool. It’s
working while you’re not. It’s credible, non-threatening and it doesn’t
eat, sleep or need to be paid. The more tapes you have out, the more
salespeople you have working for you without pay.
Helpful Hint - In the letter I send with the tape, I always ask the prospect
to return the tape to me if he has no further use for it or doesn’t share it
with a friend. This accomplishes several things for me. He either mails
back the tape, or he returns it in person, giving me an opportunity to
discuss it with him and to ask if he has a referral for me or knows
someone who would like to listen to the tape. In the letter, I also tell the
prospect that I will pick up the tape in a week or two and answer his
specific questions. Finally, it saves the cost of the tape because I can now
use it again.
Helpful Hint - If you mail a tape out to a prospect, be sure to include a
personal letter and various annuity benefit ideas, like a CD vs. annuity
historical interest rate chart and a comparison of investment features chart.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Radio Advertising
I
f you’ve started using newspaper advertising and would like to
icomplement it with another media, then radio can fill the bill.
Radio advertising will help build name recognition and top-of-mind
awareness within your target market, but more important, it can be a
powerful motivator when you use a strong results-oriented message. The
spoken word builds credibility for you and reinforces your newspaper ads.
Prospects are motivated by a good results-oriented advertising script and
may remember your message but forget your name and phone number.
So when they see your corresponding newspaper ad, they remember that
you are the one making that intriguing offer on the radio. Now with your
newspaper ad in their hand, they will call.
Radio advertising
builds credibility
for you and
reinforces your
newspaper ads.
Helpful Hint - My tests in various markets have shown that newspaper
has out-performed radio, so if you choose to use only one medium, I
recommend starting with newspaper and expanding to radio as your
budget allows. If you run both media and want to cut back, cut back the
frequency of your radio ads before cutting your newspaper ad frequency.
Remember to get your ads approved by the insurance company if you
mention their product or an interest rate in your radio ad.
Radio ads are a great place to offer free audio or video tapes or
informational pamphlets. You will find several examples of effective
radio advertising messages in the Marketing Troubleshooting Section at
the back of this book.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Now let’s discuss the proper placement of your advertising and some
techniques to get reduced cost or free advertising.
First, your newspaper advertisement should be run at least weekly in your
major local newspaper in the sections most widely read by your target
audience. Sections that have proven successful are the business or
financial section, where many of your competitors may be advertising;
the local section in smaller papers, where readers look to catch up on
what’s going on; and the obituary page, which is read faithfully by many
older people.
If you are in a large city and want to avoid the high cost of advertising in
a major newspaper, look for a specialty paper, such as a senior citizen
newspaper. These usually have much lower advertising fees and are
targeted to specific markets.
Run your ads at
least weekly in
the sections most
widely read by
your target
audience: the
business, local or
obituary pages.
Tell the advertising representative that you want him to show you every
possible method and technique he can find to reduce your advertising
cost. Some examples include a discount for running a specified number
of column inches of advertising per year, for repeating the same ad, or for
agreeing to run an ad on a certain day for several weeks. Newspapers are
not as easy to bargain with as other media, but I have seen some
surprising discounts around the country. One paper in a medium-sized
city offered an agent the same 50 percent discount given to non-profit
institutions. That’s a major accomplishment. If the newspaper makes a
mistake on an ad, they usually don’t want to credit you for the cost of the
ad, but they will sometimes agree to rerun it free one or two times to
make up for the error. Ask if they don’t offer! Every time you talk to the
ad representative, ask for ideas on discounts.
Helpful Hint - Offer to help with articles on financial subjects, or write
articles yourself and submit them to the editor for publication. Always
submit a press release on every news item about yourself, whether you
attended a seminar or you received an industry award or a civic honor of
some sort. Free publicity enhances your regular advertising plan.
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You must
advertise on a
radio station that
reaches your
target market.
Proper radio advertising placement is crucial to generating the response
rate you need to make it cost effective. You must advertise on a station
that reaches your target market. If you have several possible stations to
choose from, check them out carefully and have their representatives
make presentations to you. Go with the station that wants your money
enough to cut its spot rate down and earn your business. Stations want
long-term relationships and will work with you to come up with a plan
you can live with.
Run your ads during the morning drive time or next to a news or weather
show; listeners tune in and pay better attention at those times. Consider
sponsoring a nationally syndicated program, such as Charles Osgood or
Paul Harvey or another similar program. Again, these programs have a
large following within your target market, and audiences tune in and
listen carefully during the program.
Helpful Hint - Offer your services as a financial expert to give
commentary on financial issues. Talk to the station manager or program
director about putting on a weekly radio show about insurance, annuities
or financial information. Many agents around the country have a local
radio show. You may be able to barter your time as the host of the show
for some free advertising during your show or throughout the week.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Seminar Selling
T
his section has focused on marketing using newspaper and radio
advertising to attract annuity prospects. You can use many other
advertising media and marketing methods to find hot annuity prospects.
A number of agents have found success through seminars.
If you decide to hold a seminar, use the techniques we previously
discussed about advertising when you design your advertisement to attract
prospects to your event. Remember to have a bold attention-getting
headline, such as “Free Lunch.” There’s that powerful “free” word again.
You can use a free luncheon concept in your personalized invitations, but
you may want to avoid advertising to the public at large, since you may
not want to buy lunch for your entire city or town. However, it does
make you think. Perhaps it wouldn’t be so bad to make a presentation
using the seven success strategies to everyone who shows up. The odds
are, there would be a large number of people in the crowd with CDs,
savings accounts, bonds, stocks, mutual funds and so on who are always
looking for a better place to invest. It’s up to you to decide how many
lunches you want to buy and to design your advertising and invitations
around that parameter.
Education
is the key to
success
in sales.
If you send out personalized invitations, be sure to ask people to R.S.V.P.
because seating will be limited. This helps you get a handle on your
expected attendance. You should also have someone call each attendee
the day of your seminar to confirm the reservation. Some agents even
offer transportation to and from the seminar.
When preparing the presentation for your seminar, remember to use the
format you use in your results-oriented advertising. First, get your
audience’s attention. Break the ice with a joke or two, but keep them
short, clean and easy to understand. Appeal to the audience’s emotions
with a common problem, such as income taxes, low investment rates,
estate problems or safety concerns. Present your solution to their
investment problems with a couple of the success strategies about
annuities. You can include all seven strategies in detail in the materials
you hand out, but keep your presentation confined to one or two that you
feel best suit your audience. Remember, education is the key to success
in sales. If your prospects fully understand all the wonderful benefits of
an annuity when it’s compared to the alternatives, they will usually
choose the annuity.
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Now that you have the crowd interested, you need to show them why they
should buy from you. Again, you need to appeal to their emotions. You
must make it clear that dealing with you will make their lives easier,
richer and more rewarding. Outline your credentials, your experience and
your desire to serve your clients in the way they demand. Help them
understand annuities and their benefits fully. Settle their fears or concerns
about the safety issue. Assist them with their estate problems. Answer all
their questions about annuities or any other investments they have.
Finally, convince them that you are the specialist who will listen carefully
to their problems, design excellent solutions for them and be available in
the future to service all their annuity needs.
Your seminar
presentation
must make it
clear to the
audience that
dealing with you
will make their
lives easier,
richer and more
rewarding.
Remember to keep the seminar short and concise. Forty-five minutes is
about the longest time people will be attentive to your presentation.
Produce slides or posters which outline the key points covered in the
seven success strategies. Have some materials ready to hand out to all
seminar attendees. Brochures describing annuity benefits, investment
comparison sheets, insurance industry safety information and a cassette
taped presentation about annuities are all good handouts. Encourage the
audience to ask questions after your presentation. Answering their
questions is your chance to shine and to show your expertise and your
regard for their problems. You may also choose to hold a generic seminar
and not discuss annuities at all. Sell the importance of proper estate and
retirement planning and tax review planning. Either method is effective
for the right targeted audience.
Have your audience fill out information sheets requesting their names,
addresses and phone numbers as well as what information they would like
to see covered in future seminars and what investments or areas they are
most interested in. Call all the attendees a week or so after your seminar.
Ask if they have reviewed the handout materials and tapes, then request a
private appointment to answer specific or personal questions. Always ask
for referrals at this time.
I strongly recommend that you do as much research as possible before
attempting to have a seminar. And make sure you have personally
reviewed every detail of your seminar. This involves pre-qualifying your
invitation list, previewing the meeting room, designing your advertising
properly, practicing your presentation and double checking every facet of
your seminar.
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Seminar marketing is a tough marketplace and requires you to be on top
of your game from the right quality invitation and seminar content to the
follow up meetings and relationship selling process. It can become a very
rewarding marketing process when you put the extra effort into building the
right approach or find one that's already built correctly for you.
You can go on and on analyzing and planning a marketing and advertising
program, but the simple fact is, it will always have to be fine-tuned and
updated. The important thing for you is that these techniques and
advertising samples have proven themselves over and over again. They
have generated millions of dollars in annuity premiums and commissions
and they will work for you.
Remember, you should constantly strive to improve all of these
techniques. Now, start applying some of these ideas you’ve learned and
turn your dreams into reality.
The Sales And Marketing Tools section in the back contains the
Marketing Troubleshooting section that will help you identify mistakes in
your current marketing pieces or create new ones. Refer back to this
section for further seminar advice and examples.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Case Histories
T
he following case histories show the power of advertising and the
strength of our seven success strategies.
Case History
By Bill Johnson
I ran a small 2-inch-tall, 1-column-wide advertisement in my local newspaper
every week at a cost of $10 each insertion. It was a results-oriented advertisement
with an annuity interest rate at the top. One morning when I came to work,
a 65-year-old man and his wife were standing in front of my office door.
He showed me one of my ads, which he had cut out of the newspaper, and
asked if they could visit with me about it. We all the benefits of annuities
for about an hour and he then pulled out a $100,000 cashier’s check and said,
“Sounds good, we’ll put this in an annuity.” I filled out the application,
attached his check to it and submitted it immediately. When the policy was
returned, I met with them at my office and explained the contract in detail and
they left, pleased with their new tax-deferred annuity.
Since that was my largest sale ever at that time, I decided to write them a
thank you letter and ask for their future business, not thinking they had
another dime to their name. Thirty days later they were standing in front
of my door again with another $100,000 cashier’s check. Another CD
had come due and they asked if they could buy another annuity just like
the first one. I obliged them of course. About two years later, they called
and had $200,000 in maturing CDs which is now invested in annuities.
I then discovered that they had been receiving about $50,000 a year in
interest from bank CDs, paying over $12,000 in income taxes and living
debt free on their Social Security checks. The higher rates and taxdeferred growth of my annuities really struck home.
They have now invested well over $1 million with me and have referred
friends and relatives who have also invested. The morals of the story are
that advertising can be very effective, the benefits of annuity ownership
far outweigh taxable alternatives, repeat business in annuity sales can be
enormous, and happy clients do give referrals.
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This is not an unusual story. I have seen many similar situations in the
past. Dozens of clients have come back as often as 10 times or more,
generating thousands of dollars in commissions when the initial cost of
the advertising that brought them in was only a few dollars.
Case History
By Bill Johnson
The client is a 58-year-old business owner whom I called about every
other month for a year and a half, attempting to set up an interview. Each
time he said he was interested in learning more about annuities but was
just too busy to take the time.
I finally convinced him to just stop by some time when he was driving by
my office. He did, but I was out of town at a convention. When I
returned, I called and pushed for a meeting. He agreed and we met the
next day for about an hour. His response was, “I can’t understand why I
didn’t come here a long time ago.” He now understood how tax-deferred
growth could solve his huge current income tax problem.
Within two months we had moved $350,000 of his money from CDs and
savings accounts into annuities. Three months later I finalized a $750,000
life insurance policy on him with a $100,000 first year drop in premium
and $30,000 additional premium for the next five years. I am now
working on a buy-sell agreement for the client and his son, and future
annuity deposits should be another $200,000.
Persistency does pay off, and he is now a good friend and a very happy client.
Many of my large annuity clients are business owners or retired business
owners. They are usually very easy to work with because they understand
money and tax problems and know a better deal when they see one. Work this
market with our powerful prospecting phrases and you will find new clients.
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MARKETING
STRATEGIES
Case History
by Bobb Meckenstock
The following situation, which occurred in January, emphasizes the value
of advertising and positioning in your marketplace.
CLIENT PROFILE: Mike and Nancy, both age 55.
Local business owners who had just sold their small manufacturing
company to a larger firm out of state. The terms of the deal were too
attractive for Mike and Nancy to pass up. They negotiated a “sweetheart”
deal that allowed them to receive their equity in the business in a lump
sum and maintain the key management positions with an annual salary of
$100,000 for the next 10 years.
Mike and Nancy were not clients, but having been familiar with our
services through our radio, TV and newsprint advertising over the years,
they approached me for recommendations on their $1.5 million sale.
Two other investment firms were also solicited, but they did not have
the necessary expertise or knowledge of insurance products to make
the sale.
The clients had these needs and concerns:
1. They wanted to invest $500,000 immediately.
2. They would be earning a $100,000 annual salary over the next 10 years.
3. They didn’t want to touch the account before age 65.
4. Their primary income at age 65 would be the interest from the
appreciated value of the $500,000.
5. They had very little investment experience or time to
manage their money. Their wealth was tied up in the
business and now it was being released.
6. Investment safety was a key concern.
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The Solution:
I projected at various interest rates what the $500,000 could grow to over the
next 10 years (taxes were ignored at this point). See Illustration 1 that follows.
Then, using similar interest scenarios, I illustrated what type of income
would be possible. See Illustration 2.
The key concern of safety was the determining factor in my
recommending maximum growth through an annuity diversification
program. I used two single premium deferred annuities, one with an initial
“bonus” yield and the other with a two-year rate guarantee that would
“bonus” the account value when annuitization occurred. $200,000 was
deposited to each plan.
The remaining $100,000 was invested in an income annuity that will
distribute 1 percent per month. This 1 percent will be reinvested to a blue
chip mutual fund as an inflation hedge. The result is the ability to “dollar
cost average” into a conservative, well-managed fund of growth stocks
over the next 10 years.
And that’s not all. They liked these tax-deferred suggestions so well that
they agreed to purchase a $1.5 million survivor life policy with 10 percent
of their annual income for 10 years. The policy will be owned by a life
insurance trust, with the proceeds dedicated to paying estate and income
taxes on their future estate value. Any remaining insurance value will be a
tax-free inheritance for their three children.
Annuities solved the need for growth, safety, professional management
and income for retirement. They also established the rationale for
discussing and purchasing a large life insurance policy. This hasn’t been
the only time a case like this has developed, but it is one of the most
gratifying. The opportunities are there for you too!
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Illustration 1
Growth Projection
$500,000 today
will grow to these sums at an assumed growth rate.
Year
4%
6%
8%
10%
12%
14%
1
$520,000
2
540,800
561,800
583,200
605,000
627,200
649,800
3
562,432
595,508
629,856
665,500
702,464
740,772
4
584,929
631,238
680,244
732,050
786,760
844,480
5
608,326
669,113
734,664
805,255
881,171
962,707
6
632,660
709,260
793,437
885,781
986,911
1,097,486
7
657,966
751,815
856,912
974,359
1,105,341
1,251,134
8
684,285
796,924
925,465
1,071,794
1,237,982
1,426,293
9
711,656
844,739
999,502
1,178,974
1,386,539
1,625,974
10
740,122
895,424
1,079,462
1,296,871
1,552,924
1,853,611
$530,000 $ 540,000 $ 550,000 $ 560,000 $ 570,000
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Illustration 2
Income Projection
At the end of 10 years, an “interest only income”
may be taken as follows.
10-Year Growth
$740,122
4%
$895,424
$1,079,462
$1,296,871
$1,552,924
$1,853,611
12%
14%
$ 186,351
$ 259,055
If interest earned is:
8%
10%
6%
Your annual before-tax income would be:
$ 29,605
$ 53,725
$ 86,357
$ 129,687
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For Agent Use Only
FINANCIAL &
CONSUMER TRENDS
S
o, you want to sell annuities. Frankly, I think that’s a
iwonderful idea. After all, you want to make a living, and a
good one at that. By selling annuities, you can generate a
substantial commission income. But before you can sell your
first annuity, you have to figure out to whom you want to sell
these things. In other words, you need to identify those clients
and potential clients who will benefit by investing in the
annuities you are offering.
You may think that is the silliest thing you ever heard. You
know precisely whom you will target for annuity sales – all
those people out there who have the money to invest. If they
have the money, you have the product. If that’s your attitude,
you are making a grave mistake.
As a spokesman for consumers all over the country, I suggest
you restate your goal. Instead of selling annuities to clients,
you should be encouraging clients to buy these investments
(when appropriate) so they can achieve their financial goals,
rather than yours. After all, isn’t that what you’re trying to
achieve – a satisfied clientele whose retirement, investment and
estate planning needs you have met?
How you approach people makes a big difference in the kind of
results you will get. If you insist on selling, you face a long,
hard, uphill battle full of armed, skeptical people. Those who
enjoy helping clients and writing annuity orders are those who
have a good product, know their product inside-out, know what
their competition has available and know what clients are
looking for.
In the following section, I will set out for you many of the
concerns that ordinary, regular folks, the good people with
whom you deal all the time, have about their money and what I
see as your role in dealing with those worries. Once you are
comfortable with these issues, you can become the trusted
financial friend that people are desperately seeking.
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Why Folks Cannot Get Ahead
N
o wonder your clients can’t seem to get ahead. While every
igeneration has had to come to grips with its unique set of
circumstances, this one takes the cake.
There were the Roaring ’20s. Then came the Great Depression of the
’30s. The ’40s brought World War II and rationing. And on and on.
We’ve had to learn to cope with bear markets and bull markets. We've
suffered through run-away inflation and wild swings in interest rates and
dramatic changes in all markets.
This much is certain. Adults today have more on their plate than at any
time in the past. What’s more, it’s difficult to see how they can meet all
of the financial obligations society says they must.
Consider what people have to do. They have to save for their retirement.
No one is going to do it for them. The day of the company pension is
almost gone. And while they will collect Social Security every month
when they reach their 60s and 70s, it’s not going to amount to enough
money to place them in the lap of luxury. In fact, many distrust the
solvency of the Social Security system and caution everyone to save that
much more.
While trying to save for retirement, people have to salt enough money
away to meet the expense of their children’s college education. It wasn’t
always that way. But somehow it has become a parent’s obligation to see
to it that junior attends the priciest school that will admit him. While
everybody else tightens their belt, college and university price increases
continue to far outstrip inflation. What’s more, no one seems to question
the value received for the money spent. But that’s another story.
While preparing for retirement and children’s college expenses, many
people find themselves still paying for their own education. So many
college students are not fortunate enough to get through school without
taking out loans – loans that must be repaid. These financial obligations
often last for years, making it all the more difficult to save for those
other needs.
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Of course, while all this is going on, people have to live with the ravages
of inflation. Even at a modest 3 to 4 percent rate, inflation will have a
sizeable impact on expenses that may not be incurred for 20 years. For
example, one year of college today can easily run $20,000, including
tuition, room, board, books, travel and other incidentals. In 10 years, that
same $20,000 expense will cost $35,000. Put another way, a $80,000
education bill now will run at least $140,000 later.
Wait, that’s not all of it. There is still retirement to think about. People
today have longer and healthier lives than any generation before this.
Whatever other financial concerns people have, they definitely do not
want to outlive their money. But then they have to think about the cost of
a nursing home. That’s something else to pay for that parents and
grandparents didn’t even have to consider.
And what about health insurance and the ever-rising cost of health care?
That, too, takes a sizeable chunk of income.
Plus there are two new expenses on the agenda for which people are
making plans. It’s a relatively new phenomenon – caring for aging
parents and, at the same time, caring for adult children who need a
helping hand. It’s tough out there, and adult kids are flocking back to the
nest in record numbers. Just when folks thought they were going to have
the house all to themselves, they find that it has become multigenerational.
It’s no wonder people are having such a difficult time making ends meet.
They may be making a good living, but after income and Social Security
taxes, retirement contributions, health insurance and money set aside for
their children's college expenses, their own student loans, nursing home
care and regular savings to meet other unexpected needs, there’s not a
whole lot left over.
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Baby Boomers
T
his may be one of the most exciting times in history for the annuity
and insurance specialist, and it is all because of World War II . When
our military men and women returned from that war, they made up for
lost time. The war ended in 1945, and by 1946 the so-called Baby Boom
was on, and it continued unabated for nearly 20 years.
Today, members of the Baby Boom generation are reaching a vital point
in their lives. Consider these four key facts:
1. Boomers are slowly recognizing that they will be retiring soon. While
some have 20 years or more until they quit their jobs, others are retiring now.
With that in mind, they don’t want to lead a penny-pinching existence.
They want enough money to live comfortably, enough to afford all those
things they have done without for so many years and enough to leave to
their family and others after they pass on.
What they don’t know is how to achieve their financial goals. And that’s
where you come in.
2. Boomers have passed the accumulation phase of their lives. Their kids
are grown or almost grown. They have purchased all the houses, furniture
and other things they need. Instead of buying things these days, they are
using their excess funds to invest in their own futures.
Again, their key concern is how to deal with investments that are often
foreign to them.
3. Boomers are nervous about the future. They worry about their own job
security. They worry about the solvency of Social Security. They worry
about affording the tab for their children’s higher education, caring for their
aging parents, covering medical expenses (especially later in life), keeping
up with inflation, surviving in their “golden years” while on a meager
pension. They worry about their company pension, if indeed they even
qualify for one. They have a lot to worry about, and well they should.
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In a way, all this concern is good. In prior generations, people didn’t
worry. They felt that government or someone else would take care of
them. That’s no longer the case. The Boomers are today's current retirees.
They know it, and they worry about how they will afford it. As a result,
they are making all of their financial plans around this one central theme
– surviving their retirement years as comfortably as possible while meeting
all their current and future financial obligations.
4. These are uncertain economic times, the likes of which we haven’t
personally experienced in our lifetimes.
People don’t know what to expect next. Where are interest rates headed?
How about the stock market? Where should prudent individuals invest
their money? There are so many options, and all are fraught with danger.
Baby Boomers
want to survive
their retirement
years as
comfortably as
possible while
meeting all their
current and
future financial
obligations.
The safest bastions have crumbled over the past few years. The banking
crisis brings into question the safety of tying money up in bank
certificates of deposit. Consumers question the solvency of the nation’s
insurance companies. The great stalwart investment, real estate, has had
its share of problems from an investment standpoint recently. People who
were living on their investment income were pleased when rates were 10
percent or more. They grumbled when those rates fell to 7 or 8 percent,
but they stayed with their investments. Today, interest rates are as low.
Retirees and those soon to retire are nervous about trying to eke by on 4
percent a year.
But what can people do? Where can they put their money with some
sense of safety? That is the question on everyone’s lips these days. If
you are going to be that trusted financial advisor I keep talking about, you
have to be able to come up with the answers.
While Boomers have every right to be nervous, they also have the
opportunity to do something about their financial circumstances. They
can save, invest, watch their spending and plan how they will work
through a financial plan during the next couple of decades.
That’s where you come in. You have to be able to answer their questions
in terms they can understand. You have to anticipate their concerns, and
you have to respond honestly and in a forthright manner. You have to
maintain the highest level of integrity. If that means missing a sale today,
then so be it. You have a duty and a responsibility to your clients.
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Teaching Financial Planning
Y
our clients need to learn that financial planning isn’t necessarily a
lonely and tedious chore, especially when they are able to enlist the
aid of a willing partner.
When you think about it, it’s not smart or fair for one person to shoulder
all of the responsibility for a family’s financial well-being. Nor is it smart
or fair for one family member to be in the dark about the family’s money.
Frankly, it’s financially dangerous for one person to be in complete
control of the purse strings.
It’s not smart
or fair for
one person to
shoulder all of
the responsibility
for the family’s
financial
well-being.
Essentially, my message is this: Money management and financial
planning are more than one-person jobs. No one can do it all and do it
well. Clients need to plan a month-by-month budget; purchase health,
auto, life and disability insurance; prepare their taxes; stay up on their
investments; and so on. All this has to be done in a constantly shifting
financial environment.
So, how does a person keep up? My suggestion is to recommend that
your client enlists the aid of a partner. Make it someone he can trust, a
person who has that person’s and his family’s financial well-being at
heart. If the client is married, make it the spouse. If the client is single,
suggest the partner be a trusted relative or a close personal friend.
Don’t be surprised if the partner does not want to be included in the
family’s financial planning sessions. It’s true. Finances can be tedious and
sometimes even frightening to the person who has never had to participate
before. But be insistent. Don’t let your client take no for an answer.
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Here are four reasons it is necessary for your client to have a partner in
handling the family’s financial affairs.
1. It’s a tough job. People are, by and large, earning more money than
ever before, especially married couples when both work outside the
home. It’s difficult for any one individual to know everything about
every aspect of finances today. While there are many opportunities to
make money these days, there are just as many ways to lose it.
This may sound obvious, but when only one individual handles the
family’s money, the entire burden rests on that person’s shoulders.
A joint effort
means that both
will attend to the
details of
balancing the
checkbook,
working on a
budget and
preparing tax
returns.
A team approach works so much better. It’s safer; one partner may offer
suggestions and ask questions the other partner hadn’t even considered.
Togetherness will expand their financial horizons.
2. Personal family financial planning is a tedious job. It’s not fair for
one party to shoulder the entire burden, acting as financial guru.
Resentment often creeps in; the guru resents doing all the work, while the
other person, in turn, resents being left out of the financial picture. A
joint effort means that both will attend to the details of balancing the
checkbook, working on a budget and preparing tax returns.
3. It can bring families closer together and perhaps prevent arguments.
Too many families fight about money, or the lack of it. Could the reason
for this be that only one is informed about the family’s money dealings
while the other is not? It’s difficult to convince someone that it is
necessary to put off that new refrigerator or lawn mower because the
money has to be invested in a retirement account or that a long-planned
vacation is out of the question because the money has to go into a child’s
college fund or to pay insurance premiums or to fund an annuity for an
aging parent. Not only is it difficult to tell someone these things, it is also
painful to hear them.
When two partners work together on family finances over a period of
time, both will know about these money constraints. The fact that there
will be no surprises makes everything go a lot smoother.
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4. It’s protection. If there is a reluctant partner who refuses to get
involved with the family finances, try this argument. It is nothing short of
compelling.
It is an unfortunate fact that married couples separate, they divorce, or
one partner dies prematurely. When that happens, the remaining partner
is often left without a clue about financial matters.
This often devastating result of a death or divorce can easily be avoided
when both participate in the day-to-day, week-to-week, month-to-month
financial affairs of the family.
Since both
husband and
wife are required
to sign a joint
tax return, each
should be
equally aware of
what’s on it.
To be the trusted financial advisor you need to be to your clients, you
must take another step beyond making your clients realize they need to
plan their financial affairs with a partner. You need to explain precisely
what they need to do – together. To help them establish the essentials of
their financial plan, tell them to:
1. Prepare a month-by-month budget as well as an annual net worth
statement. That way, both partners will see precisely what money is
coming in and where it is going. Performing these tasks together will
take only half the time and will serve to inform both husband and wife of
the family’s financial position.
2. Hold monthly budget sessions. They only take an hour or two. It’s
time well spent.
3. Organize tax records and prepare the annual return together. If a paid
preparer is retained, schedule the appointment so both partners can attend
the meeting.
When married couples file a joint tax return, they pay taxes at lower rates
than do single individuals. Since both husband and wife are required to
sign a joint tax return, each should be equally aware of what’s on it. If
they qualify for a refund, both share in it. If they owe, the family will
have to pay, and that affects both people.
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Granted, tax return preparation can be drudgery, especially the part that
requires someone to collect and organize all the papers, records and
receipts for the past year. Put two on the job, and it can be accomplished
in half the time.
The same goes for filling out the actual forms. While working together
won’t make the job any more fun, at least it will make things that much
easier. Also, there is less chance of overlooking a deduction or making an
error in the calculations.
4. Review employee fringe benefit plans together. This is particularly
important when both husband and wife work. Both may be offered life
and health plans from their respective employers, along with other
benefits. Choose the most comprehensive benefits and the least amount
of overlap at the lowest cost to the family.
Check life, health, disability, auto and homeowner’s insurance policies.
Again, if a claim has to be filed, both will know where all the policy
records are kept.
5. Pay bills together. This miserable task is one that should be shared.
No one enjoys doing it, so do it together. Maybe one will decide to write
the checks one month and the other will do the honors the following
month. Together, partners can decide which bank accounts the money is
to come from.
It’s not unusual for families to have joint and separate checking, savings
and investment accounts. Whatever division of salary and other income
works best is fine. There is no magic formula that works for everyone.
The point is, when families handle the bill paying together, everyone is
fully informed of the day-to-day operations of the family’s finances.
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6. Investment decisions should be made jointly. Don’t let one person
accuse the other of making poor investment decisions. Here’s what
happened to a dear friend of mine. Dan considered himself a student of
the stock market. He studied particular stocks and called in his trades on
a weekly basis. And he was pretty successful at it. Now, it seems that his
wife had inherited some stock from her late father’s estate 20 years ago.
It was a real dog of a stock. In all that time, it had done nothing. The
dividend was right around 2 percent, and growth was almost nil. But
because it had come from her father, she adamantly refused to sell.
Finally, after years of nagging, Dan convinced her to let him sell it. He
took the money and put it into a blue chip issue that was paying a nice 5
percent dividend and enjoying better-than-average growth. From an
investment standpoint, it was a good move. As for his marriage, that’s
another story.
Six months later, the original company was the target of a takeover. The
price of the stock doubled almost overnight. Needless to say, she was furious.
This simply illustrates why neither the husband nor the wife should be
solely in charge of the investment decisions for the family and why a
single individual should seek some help when thinking about investments.
The entire family wins or loses, depending on where and how the family’s
money is invested. It’s not right to blame one person when an investment
goes sour or to give undeserved credit when an investment takes off. It
should be a team effort.
Oh, I’ve heard the excuses. Personally, this one is my favorite: One
person in the family has a head for finances and the other excels in other
areas. That’s rubbish. Both spend the family’s money. Both want nice
things. Both need retirement accounts, auto insurance, savings and
budgets. Both must participate in the job of family financial planning.
Men don’t handle finances any better or worse than women do. If
spouses don’t share the family’s money dealing, they are only hurting
themselves and their families. Don’t be chauvinistic; there’s no place for
it here. Money plays no favorites. It’s a much easier game to win when
there is a partner with whom to share the duties and responsibilities. No
one wants to do it alone, and frankly, no one should have to.
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Nationwide,
our banks are
ailing, but the
banking system
is not failing.
Crisis in the Financial Industry
O
ver the years, a lot of people have contacted me, expressing the same
concern. They are afraid—afraid their bank may be so badly run that
they stand to lose some or all of their life savings. They are afraid mismanagement on the part of their insurance company or stock portfolio
could mean they will not be able to collect when the time comes to receive
income, draw down an annuity, or cash in a life insurance policy.
You, too, have probably encountered this fear when you visit with people.
They have long memories. They continue to be worried about the
financial integrity of the nation's financial institutions, and, of course,
their savings accounts and insurance protection. I've even heard folks
question the solvency of the United States Treasury from time to time,
and whether or not they can depend on receiving social security benefits
when they retire.
Step back to the savings and loan debacle at the beginning of the 1990's.
Thrifts were shutting their doors in record numbers. The federal government
was called on to honor its guarantee—that no depositor would lose any
money, as long as they had no more than $100,000 in their account. They
kept their promise. The bail-out saved depositors billions of dollars, all paid
for by U.S. taxpayers. In fact, we're still paying for the mess caused by gross
mismanagement, inappropriate government regulation, and out-right greed
When events like the savings and loan fiasco take place, I can see why
people are tempted to initiate a run on the banks and to cash in all of their
insurance. Tell your clients not to give in to human nature. The fact is,
things are rarely as bad as the press would have you believe, despite what
you read in the papers, hear on the radio and see on television.
I won't whitewash the safety issue, and neither should you. It's a fact that
many of the nation's largest financial organizations were in the red. That's
not surprising. Some of our biggest and best businesses have had bad
years and have then later recovered.
Let's talk about the savings and loan mess. You already know that it
took billions of dollars to fix it. Estimates say taxpayers will have to
fork over upward of $500 billion over a 30 year period. More than 600
institutions have been seized; $150 billion worth of assets have been sold
or otherwise disposed of. While it wasn't pretty, bailing out depositors at
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The vast majority
of the nation’s
financial
organizations are
stable, well-run
companies.
the nation's thrifts was a huge problem that, was taken care of. Today, the
nation's banks and thrifts are in the best shape they've been in the past 50
years. No depositor lost a dime. And you don't hear much about it
anymore. All that progress in just a few short years.
Let's talk about the safety of the insurance industry. Many of your clients
are concerned about whether or not the premiums they've paid over the
years will ever amount to anything. They wonder if they will be able to
collect on that annuity. They wonder what happens if their insurance
company goes out of business, or can't honor their policy contracts. They
have heard and remember horror stories about Executive Life.
Don't sidestep the question. Bring it up, because if you don't, they will.
For example, chances are, you have heard about the extremely negative
Weiss Research Reports on the financial woes of life and health insurers.
It is pretty scary for consumers when they read their insurance company
may be on the rocks. But before they panic, the savvy agent explains the
entire story. Weiss Research doesn't do that. I've asked some nationally
prominent insurance experts to explain what the Weiss Research Reports
really means. Here's what they say (and what you need to explain to
anyone who will listen.)
Don't base your judgement of the financial condition of an insurer solely
on the Weiss Report. Check out the ratings put out by other wellregarded experts in the field—Moodies, Standard & Poor's and Best.
Also, remember, insurance companies have lots of other assets beyond
their commercial and residential real estate mortgages. They hold money
in government bonds, high grade commercial paper, some stocks and
similar investments.
Explain to your clients how insurance companies manage their money.
While some companies segregate their various accounts, most do not,
simply because it's quite inefficient to do so. They don't set aside one pile
of money for policyholders, another pile to pay commissions and other
operating expenses and still another for their capital surplus. They take
what comes in and they invest it in various places.
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Finally, let's talk about insurance companies and their relative financial
health. Of course, the biggest news many years back was the failure of
Executive Life in California. Hot on the heels of that problem came the
report of several other insurance companies in the same category—
overextended financially, and, therefore, out of business. The press had a
field day, reporting (accurately) that these problem companies together
accounted for billions of dollars. What they didn't bother to report is that
policyholders are getting their money, because of co-insurance protection,
state guarantee funds, and the merger of these ill companies with those in
robust financial health.
What's more, the press failed to report about the good financial standing
of thousands of other insurance firms which continue to maintain billions
of dollars in assets to back up their contracts. Go figure.
The bottom line is this: For one reason or another, some banks and
savings and loans will fail every year. The same holds true for a handful
of insurance companies. That shouldn't surprise anyone. But the vast
majority of the nation's financial organizations are stable, well-run
companies that make profits for their owners, pay salaries to their
employees and protect the assets of their depositors.
What happens when a bank fails or an insurance company is taken over
by the State Insurance Commissioner's office? Depositors don't lose their
money unless they have more than $100,000 in a bank account.
Insurance company policy owners aren't left out in the cold, either.
Another insurer steps up, takes over the contracts and services its new
clientele. Any shortfalls should be covered, up to specific limits, by state
guarantee funds. The general public has been scared silly over the
mistaken fear they will lose their money if it's in a shakey bank or
insurance company. The facts just don't bear it out. But the press isn't
going to explain that to your clients. That's up to you.
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Protecting the Estate
E
state planning is a necessary task. Unfortunately, it’s one that too few
people recognize and undertake. It is your role to help your clients and
your potential clients focus on protecting their estates.
You can explain it this way. When youngsters become adults, they learn
to accept adult responsibilities. Among these responsibilities is the
realization that they will work hard all their lives and they will probably
do without some of the things they would like to have. They will “make
do,” despite the urging of advertising professionals who urge them to
spend and spend and spend some more. They will do without so they can
take care of themselves later in life and perhaps even leave an estate to
their children and grandchildren. Hopefully, they will still earn enough
money to live on, plus pay for some extras, recreation and savings.
There are a
number of
perfectly legal,
time-honored
ways to beat the
tax collector.
So, the real question becomes, what will they do with the money that is
left over after paying the rent or mortgage, groceries, utilities, insurance,
car payments, and other essentials?
If your clients are smart, and you have to hope they are, they will salt
away a sizeable portion of those extra funds in savings, investment and
retirement accounts, especially if they plan to enjoy the fruits of their
labors and intend to pass their accumulated wealth on to their
beneficiaries and others.
You need to explain that if, instead they plan only to enrich the United
States Government as well as their state Government through the state
inheritance tax, they don’t have to worry about the proverbial rainy day.
They might as well go ahead and spend everything right now.
Fortunately, there are a number of highly effective and perfectly legal
ways to avoid the federal estate tax and the state inheritance tax. The
easiest way is simply to make sure that you don’t leave an estate behind at
your death that exceeds the limit provided for in the law. For years, the
limit for escaping federal estate taxes was $600,000, then went to $625,000.
In 2006, the amount for a tax free estate was increased to $2,000,000. Under
current legislation by the year 2009, the amount will have increased to $3,500,000
and is scheduled to be phased out entirely by 2010. At which point congress
will have the opportunity to continue that policy by making a new law or
the inheritance tax will revert to previous levels.
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Now I’ll grant you that this is still a lot of money. Still, it is quite
common for folks of ordinary backgrounds and means to amass that much
and more. The problem is, when you leave an estate that exceeds the taxfree threshold, the tax bite becomes quite substantial. Though current
legislation does decrease the tax rate through 2010, it will continue to be
as high as 55 percent until that time. Should a future congress want to
change the plan they will have that ability.
As silly as it may seem to say, people can accomplish their goal of
reducing the size of their estate to below taxable limit by spending some
of their money on those things they may have been denying themselves
all these years and by making gifts to family, friends and charitable
causes.
The easiest way
to keep your
accumulated
wealth out of the
tax man’s grasp is
to place some or
all of your assets
outside of your
taxable estate.
The law says that you can give away money every year within limits to
as many people as you want without reporting the transfer to the IRS. You
have to report larger gifts but may not have to pay tax on the transfers.
Married couples can jointly give away double the limits annually to as
many people as they like.
For example, say you are married and have three adult children, each
married with two children of their own. That three offspring, three
daughters-in-law or sons-in-law, plus six grandchildren, a total of 12
people. Each calendar year you and your spouse can give cash or property
to each of them. At that rate, you can reduce the size of a potential estate
quite rapidly.
You can give away more than the limits each year. However, if you do,
you will have to report the gift to the IRS on a federal gift tax report.
Still, you probably will not have to pay any tax. The law says each
person gets a “transfer” tax exclusion equal to the threshold amount,
which means that during your lifetime you can personally leave an estate
and/or make reportable gifts up to the current limit in any combination,
without triggering the transfer tax.
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Giving Good Advice
I
had the nicest visit the other day with a husband and wife and their
idaughter. They have lived in the area almost all their lives. They came
to see me because they wanted some good, solid, unbiased financial
advice (“unbiased” being the key word here). Now, there are a lot of very
competent financial people around, but these folks just didn’t feel
comfortable asking them for advice about how they should handle their
money. They voiced three reasons.
First, they said they felt the advice would be tainted because many of
these financial people make money from their recommendations. As a
result, they can’t be unbiased with their recommendations.
I know many
investment
advisors,
insurance agents
and others in
similar
occupations, and
I trust their
advice.
Second, since the family hadn’t received advice – not even when CDs and
other investments had come due – they were skeptical of any future
advice that might have been offered.
Third, they felt they had been overpaying their taxes, so they didn’t feel
comfortable with some of the advice they had been receiving on the tax
planning side.
I addressed these issues one by one.
I’ve heard the complaint that people who sell financial products cannot be
unbiased, and I am convinced this is blatantly untrue. I know many
investment advisors, insurance agents and others in similar occupations,
and I trust their advice. They have demonstrated beyond the shadow of a
doubt that they have the best interests of their clients at heart. They have
said to me on many occasions that a satisfied client is the best
recommendation they can have. They get nothing out of a one-shot deal.
The complaint that the family’s financial advisors haven’t cared very
much in the past was aimed foursquare at their banker. They have money
in short-term bank CDs. Now that rates are way down, customers are
looking for a better deal. Frankly, I don’t blame them.
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When it comes
to investments, it
is ultimately
the client’s task
to decide how
to handle
the money.
I described how a bond ladder works – the saver earns higher yields by
staggering CD maturities. They were incensed because their banker had
never suggested anything other than six-month certificates.
They have a point. But it’s not entirely the banker’s fault. Remember,
when it comes to investments, it is ultimately the client’s task to decide
how to handle the money. These folks had always told the banker they
wanted safety and the ability to get to their money quickly. A
six-month certificate of deposit certainly fits the bill.
As for the amount of tax they pay, I totalled up their income from all
sources, taxable and nontaxable, and divided that by the amount of federal
income tax they had to pay. It amounted to less than 8 percent. Based on
that calculation, they realized they really weren’t paying all that much
in taxes.
The point is, when clients have financial concerns about their taxes,
investments, savings, insurance and credit, they are going to visit with the
experts with whom they feel most comfortable. They need to discuss
their various concerns. But they also need to remember that, ultimately,
the decisions are theirs, based on the information they have collected.
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It’s easy to beat
inflation – watch
specific expenses
and earn more on
investments.
Beating Inflation
E
very month, the U.S. Department of Labor makes a big deal over the
ilatest inflation rate. It’s reported in all the newspapers and is
broadcasted by all the television and radio stations in the country. I mean,
the consumer price index, also known as the CPI, is big, big news.
Now, for some people, watching the CPI is very important. A lot of labor
contracts tie annual wage increases to the rate of inflation, as measured by
the Labor Department. Others increase their rents by inflation. I’ve seen
all sorts of agreements which incorporate inflation into various financial
calculations. But for most people, inflation is something they see at the
supermarket and gas pump.
Consider the latest statistics. Consumer prices have been increasing three
or four percent over the past few years. It’s easy to beat that. All a
person has to do is watch specific expenses and earn more on
investments. More on the investment side in a minute.
The consumer price index is comprised of seven items, and each carries a
different weight. There’s housing (42 percent of the index), food (18
percent), transportation (17 percent), apparel (6 percent), medical care (6
percent), entertainment (4 percent) and everything else (6 percent). Every
month, some of these items go up, and some go down. For example, one
month energy prices may drop while the cost of medical care soars.
So, the only way to beat inflation is to keep costs down in areas that are
increasing. For example, if you rent, chances are, your rent will increase
as inflation increases. Those who own their homes can watch that
segment of the CPI soar, and it simply doesn’t affect them, unless, of
course, they have an adjustable rate mortgage.
While you can’t do much about the price of oil, you have a great deal of
control over how often you purchase a car and how much it costs. If you
drive a car until the wheels fall off, you will save tons of money over the
long haul.
If you eat right, exercise and otherwise take care of yourself, you will pay
much less in medical care than someone who does not.
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The real key to beating inflation is on the investment side. There’s an old
saying that is as true today as it was years ago when some unknown
philosopher thought of it: It’s not how much you make, it’s what you get
to keep.
With any investment, it’s not how much it earns and grows, it’s how much
the investor gets to keep after the government gets its slice of the pie and
the economy takes through inflation.
Annuities
are the
investment
of the New
Millenium.
Consider this example. A client has $10,000 in a one-year certificate of
deposit earning 6 percent annual interest. That means one year after the
client makes the investment, the bank will return the $10,000, plus a
check for $600. Of that $600, the federal government will take $168
(assuming a 28 percent tax bracket); the state government will take
another $30 (assuming a state income tax of 5 percent); and inflation will
eat up another $400 of the original $10,000 investment (assuming a 4
percent annual inflation rate). How much is left after everybody else gets
their share? A lousy $2.
Can your clients beat inflation, even at the moderate 4 percent levels
being discussed today? Absolutely. However, they will have to earn
more than is being offered by today’s banking institutions.
I’ll let you take it from here. In my opinion, one of the best investments
for today’s pre-retirement and post-retirement investor is the modern
annuity. I say without hesitation that annuities are the investment of the
new millenium. They could very well replace the certificate of deposit.
The rates are higher than those paid by the banks; they offer tax deferral;
they offer safety. In a nutshell, they offer all those things that ultraconservative savers have wanted for years, only in a better package.
NOTE:
Concentrate on learning the concepts being described.
You can consider your interest rates, tax
rates or annuity presentation and
disclosure ideas later.
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Additional Thoughts for Clients
About Retirement Planning
T
raditionally, savvy Americans have built their retirement income on
three legs--Social Security, a company retirement plan, and individual
investments. This is still the way to do it. Even under the latest tax law
changes, a large portion of personal investments can be structured to
avoid or delay the income tax.
There is nothing tricky or devious about these tax-saving strategies.
Congress wrote them in the law so Americans would provide for
themselves in their old age, lessening their dependence on the
government.
First, let’s kill a persistent myth. Doomsayers continue to warn that the
Social Security System will collapse, or that benefits will be drastically
reduced. At very least, these critics say you will receive much less than
you paid in.
Congress is currently
evaluating how to
protect the Social
Security system
into the future
In case you haven’t noticed, your Social Security taxes (the FICA deduction
from your paycheck) have been rising year after year. So have the taxes
from your employer. All of this money goes into government coffers, and
the government sends out social security check to retirees. Congress is
currently evaluating how to protect the Social Security system into the future.
Workers pay Social Security taxes and their employers chip in a like
amount. That is a sizable chunk of money. But what can you expect to
get out of it? Currently,the average benefit paid to a retired worker is about
$12,000 a year. The average retired worker and spouse get over $20,000 a
year from the government. That’s the average amount. If you paid the
maximum amount in the system every year during your working years, you
stand to collect a lot more than that.
There is one more thing to keep in mind. Social Security benefits increase
every year in line with the previous year’s inflation rate. It may not be
much, but the extra money can be welcome.
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If you are still dubious about Social Security, listen to this from Robert J.
Myers, whom I consider the nation’s leading authority on Social Security.
Myers is no dreamer; he was chief actuary of the Social Security
Administration, then assistant commissioner and, later, executive director
of the National Commission on Social Security Reform, which drew up
the 1983 legislation that put the Social Security system on sound footing
way into the 21st century. Myers no longer works for the government, so
he can speak freely, and he does.
“Despite what some people might believe, young people will get their
money’s worth, and somewhat more, from the Social Security taxes that
they pay. Not only is the Social Security program on a sound financial
basis overall, but it also does provide people of all ages with at least a
reasonably good buy of retirement income protection.”
Of course, $12,000 (or $20,000) isn’t nearly enough annual income. You
will need the other two legs of retirement support, company pensions and your
own savings.
By planning,
you can earn a
pension from
most, maybe all,
of your
employers.
An astounding number of Americans have only a vague understanding of
their company pensions. If you’re one of those, stop by the personnel office
and pick up enough printed material so you can figure out what you have to
do to qualify for a pension and how much you can expect to collect.
Typically, employees become vested, meaning entitled to benefits at age 65,
after five years of service. Under some plans, even less time is required.
Becoming vested can be a significant factor in deciding when, or whether,
to leave a job. It’s downright foolish, or in most cases, careless, to leave a
job in October if you will become vested in November. That applies
whether you’re 60 years old or 40 or 20.
I talk about pensions because most people work for several employers
during their 40 or so working years. By planning, you can earn a pension
from most, maybe all, of your employers. Anytime you leave a job, make
sure you know when and how you can start getting your pension. Keep in
touch with your old employers; don’t expect those companies to come
looking for you on your 65th birthday. Apply for your pensions, and
make sure you get them.
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The third leg of the retirement stool must be constructed from your own
savings and investments. Fortunately, Congress has made this possible
with wonderful tax incentives. The best known is the venerable IRA, or
Individual Retirement Account.
Thanks to tax law changes, there are two types of IRA’s. There is the
well-known Traditional IRA which has been around for decades. And then
there is the so-called Roth IRA, named after the Senator from Delaware
who was responsible for the legislation.
The Traditional IRA
First, your existing IRA will not be taxed and will continue to accumulate
interest and dividends, free from federal income tax until you withdraw
the money, usually after you reach age 59 1/2. You have to start
withdrawals once you reach 70 1/2.
Second, you can contribute up to the current limits each year to your
traditional IRA, as long as you have at least that amount of earned income.
If your spouse earned income, he or she can also contribute. What’s more,
your contribution is tax deductible. If one spouse works and the other does
not, the couple’s IRA contribution can total double the current limits with
no more than half going into anyone’s account.
Third, approximately 75 percent of current IRA investors can fully deduct
their contributions. Another 15 percent qualify for partial deductions.
Only the remaining 10 percent are not entitled to deduct any of their IRA
contribution.
Despite what you may have heard to the contrary, the traditional IRA is
alive and kicking. And well it should be. It remains a terrific investment
opportunity for individuals. Granted the rules with regard to the amount
that can be contributed, whether or not a person is covered by a companysponsored retirement program, and a person’s marital status and income
level are detailed. Nevertheless, the traditional IRA remains a
cornerstone of retirement planning.
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The Roth IRA
There are two major differences between the Roth IRA and the traditional
IRA. With the traditional IRA, your contribution is tax deductible and
your contributions or withdrawals are subject to income tax. With the
Roth IRA, your contributions are not tax deductible, and your
distributions or withdrawals (past age 59 1/2) are not taxable.
What a deal! Make your contributions now and forgo the tax deduction.
Then years later when you need the money, you can take whatever you
need and pay no income tax.
The Roth IRA is terrific, subject to to important caveats.
Traditional IRA
contributions
will accumulate
interest or
dividends which
are free of
income tax until
the money is
withdrawn.
First, it only makes sense to do the Roth IRA if you plan to tap your IRA
investments during your retirement years. Many people do not. Instead,
they plan to take only the minimum amounts from their IRA and leave the
remainder to their beneficiaries.
Second, the Roth IRA works if you trust Congress not to change its mind
sometime in the future. It could be a disaster if you forgo a current tax
deduction and later Congress decides to tax withdrawals anyway.
Is there any chance of that? Certainly.
Consider the successful young couple who salted away $70,000 into their
respective traditional IRA’s over 35 years. Together they have invested
$140,000. They have been conservative stock market investors, earning
on average 12 percent a year. They have amassed a fortune worth almost
$2 million. The money will be taxed as it is withdrawn from the IRA.
If these same people choose the Roth IRA, they will lose a tax break, but
they will be allowed to withdraw the entire $2 million tax free.
Which is best? That’s the choice of the investor.
I’ll talk about where to invest your retirement money a little later on. But
right now, let’s talk about when to invest it. You can make your IRA
contribution as early as January 1 or as late as April 15 of the following year,
the tax filing deadline. For your own sake, make that contribution early.
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You don’t believe it matters? Here’s the difference. Let’s say Doug makes
his IRA contribution every January 1, while Dean doesn’t make his until
April 15 of the following year. Both contribute $2,000 a year, and both
accounts earn 10 percent a year. After five years, Doug has $13,431 saved.
Dean has only $9,757. After 20 years, the difference comes to $18,450.
And after 40 years, Doug’s nest egg will exceed Dean’s by $129,750.
Many companies today offer their employees a tax-deferred pension
savings program that is at least as good as an IRA. It’s called a salaryreduction plan, or a 401k plan, after the section of the Internal Revenue
Code that describes it. A 401k is usually offered in addition to a
traditional company pension plan.
Under a 401(k) plan, you sign up with your employer to have a portion of
your salary deferred, and then invested into the savings plan. Five
percent or so is typical, and your annual contribution is limited by the
terms of the plan. Many firms partially match the employee’s
contribution. For example, say you agree to contribute 5 percent of your
salary into the 401(k) plan, and for every dollar you save, your employer
agrees to add 50 cents.
All that money goes into a professionally managed retirement fund, and
you pay no income tax on your contributions, or on the interest or
dividends, until you withdraw money, usually after age 59 1/2. Before
then, you can withdraw only your own contribution, and even then you
will probably have to pay income tax on the withdrawal, plus a 10
percent penalty.
If you work for yourself, full or even part-time, you can take advantage of
any number of generous tax-sheltered, self-employed retirement
programs. Typically these are far more generous than the Traditional or
the Roth IRA. But they are minutely detailed. The best advice for
establishing a retirement program for the self-employed is to get the
details from those people who administer these plans for people. That
includes bankers, investment brokers, and insurance companies. They
can guide a person through all the minutia so they don’t get into trouble
with the IRS. There are two basic types of plans, profit -sharing plans
and money-purchase plans.
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Personally, I don’t care for the money-purchase plan. The paperwork is
much more complicated, and the plan is rigid in contrast with the
flexibility of a profit-sharing plan. With a profit-sharing plan, you can
contribute one year, contribute a smaller percentage the following year
and contribute nothing at all the next year. As long as your contribution
doesn’t exceed the maximum, you can change the amount as often as you
like. And you can start withdrawing money at age 59 1/2, whether you’re
retired or still working.
Not so with a money-purchase plan. Whatever percentage of net selfemployment income you contribute the first year, you must contribute
nearly every year; few modifications are allowed. And you cannot
withdraw money until you retire, no matter your age. Many selfemployed people keep working, at least a little, until they are no longer
able. As long as you report any self-employment income on your tax
return, you’re barred from tapping your money-purchase savings.
Open an IRA or
self-employed
plan as soon as
you begin your
career.
Younger Americans often ignore retirement savings on the grounds that
they can start saving later in life. I recommend that you open an IRA or
self-employed plan as soon as you begin your career. Even if you only
contribute a few hundred dollars the first year, you’ll be on your way. As
the years go by, you’ll see your savings really amount to something
substantial. Start early. You’ll be glad you did.
But now the question comes up, Where’s the best place to save? After all,
you don’t invest in the IRA itself, you put IRA money in a bank, mutual
fund or insurance company.
Most important – do not be casual about a percentage point of difference
with your retirement savings. By the time you hang it up, one additional
point of interest can amount to $100,000 or more.
Your retirement savings are the ultimate long-term investment. Granted,
where you put the money depends on your age, your other investments
and your disposition. I believe in a balanced investment program for your
retirement money. This is not the place to gamble.
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Questions Frequently Asked
by Today’s Consumer
Question: I’m really irritated with my bank. They keep asking me to
send them a personal and business financial report every year. That’s
expensive. You know what accountants charge these days. First, I don’t
think it’s any of their business how much money I make. Second, I only
have one loan with them, and I’ve never been late in the years I have been
paying on it. If you ask me, I think the bank should be happy to have a
good customer who pays his bills on time. What would happen if I didn’t
send the report to them?
Answer: You make an excellent point. If you are not borrowing from the
bank, they have no reason to ask for a financial statement. However,
since you are a borrower (and I assume the loan is a business loan), the
bank has every right to see a financial statement. They just want to make
sure you are doing well and will be able to continue paying on the loan.
Chances are, nothing would happen if you didn’t send the financial
statement. They wouldn’t require you to pay off the loan early. However,
you should not expect to do much business with the same bank in the
future if you refuse to send in the statement.
I suggest you make an appointment with the bank to discuss their need for
the report. They may be satisfied with a copy of your tax return. My
point is, don’t be upset with your banker. You can’t blame them for trying
to stay up with all of their loans.
Question: I’m only 24, starting out on my first real job since I graduated
from college. I know I’m supposed to invest for the future. Probably the
best way to do that is with an IRA. But my question is, where do I stick
the IRA money?
Answer: Your thinking is absolutely correct. Start saving for retirement
early and often. That way, you will have built up quite a nest egg.
As for where the money should be invested, that’s up to you. You have
all sorts of choices, including annuities.
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Anyone who
operates a small
business should
seriously consider
having a tax
professional
prepare their
return.
Question: My husband and I have jobs, and we also run a sideline
business in the evenings and on the weekends. Every year, we take our
taxes to an accountant. His bill keeps going up and up. I was thinking of
trying to do our taxes myself next time around. My question is, is the IRS
more likely to audit a tax return if I do it myself, or does it really make
any difference?
Answer: You didn’t tell me how much you’re paying for tax return
preparation work, so I can’t judge if you’re getting good value for your
money. But I will tell you this. Anyone who operates a small business
should seriously consider having a tax professional prepare their return.
The tax law is so complicated when it comes to business matters, it takes
a full-time tax counselor to know what’s what. It is just too easy to make
a fatal mistake that could cost you back taxes, interest and penalties. No,
the fee charged by an accountant is more than made up in tax savings and
avoiding costly pitfalls.
Another plus to having an accountant prepare your return is you
significantly reduce your audit risk. After you file your return, the IRS
processes it, and, ultimately, decides if they want to question it. But
before they call you in, someone at the IRS visually goes over the forms.
They note if you prepared your return yourself or if a trained professional
has done it. The IRS knows that an accountant is more likely to have
asked to see the same underlying documents the IRS would want to
review. As a result, the IRS reviewer may call the whole thing off before
it ever gets started.
Question: I’ve often wondered how companies like Sears, Amoco, VISA,
MasterCard and others set their interest rates. I see in their solicitations
that they charge different rates in different states. For example, Sears
charges 21 percent in South Dakota, 12 percent in Arkansas, 18 percent in
Minnesota, 19.8 percent in Iowa. Amoco charges 21.6 percent in South
Dakota, 10 percent in Arkansas, 18 percent in Minnesota and 19.8 percent
in Iowa. Does each state decide how much interest a company can charge
on a credit card?
I tried to find out by calling the state capitol, but all I got was the run-around.
And when I finally got through to the right people, they treated me like I was
treading on sacred ground and as though it was none of my business.
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Answer: The state legislature of each state sets the maximum interest rate
that can be charged in the state, if they choose to legislate in this area.
And that’s a very big “if.” Many states had these laws on the books, but
they were repealed in the early ’80s. The reason was that interest rates
and inflation were sky-high at the time. The prime rate was over 20
percent. The government was paying 16 percent or more on Treasuries.
Money market mutual funds were quoting 15 percent or more. If lenders
were not allowed to charge more than 14 and 15 percent, they would have
simply stopped lending. As a result, many state legislatures repealed their
usury laws.
Although interest rates have declined significantly since then, the
government has never reinstated a limit on what lenders can charge to
their customers.
Three or four of
the best credit
cards are listed
every month in
the Scorecard
section of Money
Magazine.
As things stand now, any business, such as Sears, Amoco, VISA,
MasterCard, can charge whatever it pleases. If the rate is too high, you
will obviously take your business elsewhere. After all, why would you
agree to pay interest charges of 21 percent or more when others charge
only 15 percent?
Your state legislature could reenact a usury law that restricts the rate of
interest that businesses can charge, but that’s not likely. If you’re looking
for an option to the high interest rates charged on credit cards in your
state, you can always opt for a lower rate. Either take out a bank loan, at
a much reduced rate, or use a credit card that is in the 12 to 15 percent
range. There are plenty of them around.
Question: I hear about all these bank credit cards with very low interest
rates. But when I ask around, no one seems to know how to actually find
them. Would you tell me how I can find out about low interest credit cards?
Answer: If you want a list of banks offering credit cards with low interest
rates, send $1.50 to Bank Card Holders of America, 560 Herndon
Parkway, Suite 120, Herndon, VA 22070. Or check out a recent issue of
Money Magazine. Every month in the Scorecard section, they list three
or four of the best credit cards with and without annual fees.
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TRENDS
Question: I am really ticked off. I had an automobile accident. It wasn’t
much, really, and no one was injured. The problem is, my insurance
company says my old Nissan is “totaled.” They have offered me $2,700.
I checked. The same car on a used car lot is going for $3,200. I don’t
want to go out and buy a new car. You know how expensive that is. I
want my damaged car repaired. Is that too much to ask? After all, that’s
why I buy insurance.
When you
refinance a loan,
you don’t want to
extend the period
of time you have
to pay, because
you will wind up
paying too much
interest.
Answer: I’ve had this explained to me by some of the best insurance
people in the country. The fact is, your insurance company is doing what
the contract says. There are a lot of people who complain, bitterly, when
their auto insurer totals out their car for less money than the owner thinks
it is worth.
Now, there is no magic formula to determine when a damaged vehicle is
considered a total loss. Actually, it all depends on what the car was worth
before the accident. Some insurance companies will call a car a total loss
when damages exceed 75 to 80 percent of a car’s retail value. And no
insurance company is going to pay more to repair a car than it is worth.
That just isn’t good business.
Question: I like the idea of refinancing my mortgage. I’m paying about
$550 a month now, and if I can refinance, I’ll cut my monthly payment to
$400 without extending the time I still have to pay. My problem is, my
banker doesn’t want to do it. He says that I don’t qualify under the
current guidelines. I think that stinks.
Answer: You bring up three very important points. First, it makes good
sense to refinance any loan, especially your home loan, when you can
save that kind of money month in and month out.
Second, when you refinance a loan, you don’t want to extend the period
of time you have to pay, because if you do, you will wind up paying too
much interest. It’s easy to reduce your monthly payment. All you have to
do is take the mortgage which still has 24 years to run, in your case, and
refinance the loan for 30 years. The amount you pay every month will be
less, but you will extend the loan that much longer. In my opinion, that is
not a good move.
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The bi-weekly
mortgage is
almost as good as
the 15-year
mortgage.
Third, your banker doesn’t set the rules for who qualifies for a mortgage
loan and who doesn’t. Chances are, he doesn’t even have your loan
anymore. It’s probably been sold years ago. So don’t think your banker
is trying to hold you up. If that was the case, all you would have to do is
go across the street to another lender who would be more than happy to
write up the loan (and collect the loan processing fees).
The cruel fact is, lenders are required by various governmental
organizations to make sure borrowers meet certain guidelines as to
income and debt. If you don’t meet them, you don’t get the loan. It’s just
that simple. And yes, it’s entirely possible that some years ago, when the
lending guidelines were more relaxed, you did indeed qualify for the loan.
And yes, I’m sure that you have never been late with a payment. Still,
under today’s rules, you may not satisfy the lending requirements, so your
banker has to say no to your refinancing application.
Question: What do you think of the bi-weekly mortgage? They say it
can save me tens of thousands of dollars. All I have to do is take my
mortgage payment, cut it in half and send in my check on the first and
fifteenth of the month. It sounds too easy. What’s the catch?
Answer: I think the bi-weekly mortgage is almost as good as the 15-year
mortgage. The reason it’s not quite as good is that it doesn’t save you
quite as much money over the long haul.
With that in mind, let me clear up a couple of important details.
First, you can’t just start making payments using the bi-weekly plan you
describe. You’ve entered into a contract with your bank. In exchange for
the money to buy your house, you have agreed to pay a fixed amount the
first of each month. If you send in extra, the bank will apply the funds to
your principal, but that doesn’t mean you can reduce what you pay on the
first of the next month.
Second, the reason the bi-weekly mortgage works as well as it does is you
end up making 26 payments during the year. In other words, you make
one extra full mortgage payment each year. As a result, you finish your
mortgage obligation within 19-plus years instead of dragging your
payments out for the full 30 years.
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TRENDS
If you can
afford disability
insurance, you
probably
should get it.
Third, there is a difference between a bi-weekly mortgage and a bimonthly mortgage. With the bi-weekly mortgage, you pay once every
two weeks. With a bi-monthly mortgage, you pay on the first and
fifteenth. The bi-weekly mortgage is a little more costly, but you pay off
the loan earlier, which means you save that much more in interest.
Question: My insurance agent is trying to get me to buy some disability
insurance. Frankly, I think it’s pretty expensive for what you get. What
do you think about buying a disability policy, and what are the things I
need to watch out for?
Answer: Disability insurance is perhaps the most needed and the most
overlooked insurance on the market today.
Chances are, you have life insurance. And you have probably insured
your house against damage. However, the potential for suffering a
disability is many times greater than an accidental death or a house fire.
If you can afford disability insurance, you probably should get it.
As far as what to look for in a policy, you should make sure you
understand the insurance company’s definition of “total disability.” That
is essential. You should get a policy that provides for residual disability.
That’s when you’re not totally disabled, yet suffer a substantial loss of
income. You need to know the waiting period before benefits start
coming in, if there is a waiver of premium and if you can get noncancelable coverage.
If you’re not sure what all these terms mean, you should talk with your
insurance agent for a full explanation.
Question: I’m in over my head with credit card debt. We owe over
$8,000. We could handle the debt, but the interest charges are eating us
alive. The problem is, the bank won’t give us a bill consolidation loan.
Any suggestions?
Answer: I asked a couple of bankers I know why they would turn down a
request for a bill consolidation loan. And did I get some answers! They
don’t like unsecured loans. They don’t like lending money to people who
have shown they are unable or unwilling to handle debt responsibly.
They don’t like to drag small loans out over a period of years. Yes,
bankers consider anything under $10,000 to be a small loan.
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Fortunately, you do have several options.
1. Try other banks, savings and loans and credit unions that might be more
anxious to get your business.
2. Ask relatives if they might be willing to lend you the money at, say, 12
percent. They would earn more than they’re getting on their savings, and
you’d pay less than you’re paying on your credit cards.
3. Ask your boss for an advance on your wages.
4. If you’re self-employed, ask a customer if he would be willing to pay in
advance for your services in exchange for a discount. Again, you both win.
5. If you have equity in your home, a home equity loan may be the answer.
6. If you have cash value life insurance, it may be time to tap into that equity.
People are not dumb. They want value for their money. Unlike in the past,
people today are unafraid to ask their questions. What’s more, they now
demand straight answers.
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For Agent Use Only
SALES AND
MARKETING TOOLS
I
n this Moneytalks volume, we have provided you with a
inumber of tools you can use to generate annuity sales.
To help you further, in this section you will find comprehensive
answers to tough objections prospects raise about annuities.
This section will also examine guaranteed investments vs.
speculative investments and ways you can help prospects
determine whether they are savers or investors. And we’ll take
a closer look at the insurance industry safety issue and provide
you with valuable information about the industry that you can
share with your prospects and clients.
At the end of this section you will find copies of the charts and
graphs from the Selling Annuities section and a Marketing
Trouble Shooting Guide to help you create new marketing and
advertising pieces or fine-tune your existing ones. You will
also find many examples of advertising materials.
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The insurance
industry is very
safe and has
actually
increased its
net worth
over the years.
Overcoming the Tough Objections
Y
ou need to have answers to simple misconceptions and objections
about annuities, because if your prospect brings them up before you
ask for an appointment, you may never get the chance to make your
full presentation.
The following is a list of the most frequent objections you will receive
from annuity prospects. Study them carefully and start accumulating
information concerning each objection so you will have a knowledgeable
and up-to-date response for your prospects when they bring up an
objection. In addition, you should start saving interesting articles
concerning industry safety, tax-deferred growth, annuity benefits,
indexing, probate and estate problems and other information you
feel will help you in a sales presentation.
Remember that variable annuities are a completely different product and
contain risks, fees and expenses and other features not associated with
fixed rate guaranteed annuities. Be careful not to use an answer to an
objection that applies to a fixed annuity and would not be appropriate or
correct for a variable annuity.
For example, telling a prospect the insurance industry is very safe may
make him think there is very little risk in the variable annuity stock or
bond account he is evaluating. Explaining how wonderful tax-deferred
growth is may make him or her assume a variable annuity will only grow
in value, when he must be aware of the downside risk that is also
associated with it.
Question: How safe are the insurance companies that sell fixed rate annuities?
Answer: The industry as a whole is very safe and not really affected by
the few problem companies that have received so much media attention.
The life insurance industry has actually increased its net worth over the
past couple of years, even after taking into account its losses in junk
bonds, real estate and other problem assets. The media attention has forced
industry management to rethink their investment guidelines and to move
increasingly toward higher quality investments.
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Question: Why buy a fixed rate annuity if income taxes still have to be
paid someday?
Answer: Prospects need to understand the benefit of tax-deferred growth
and the triple compounding that takes place when they earn interest on
their current tax savings. A tax-deferred account will grow substantially
larger than a taxable alternative earning the same interest rate. When your
prospects need income for emergencies, medical care, nursing homes or a
more comfortable retirement, that larger nest egg will generate much more
income, regardless of their future tax bracket.
Modern annuity
contracts have
many annuity
payout options,
including
“interest only,” if
that is all the
client wants.
Question: Why should an elderly prospect choose a fixed rate annuity
over a short-term investment if he may not live much longer or may need
his money for a catastrophic illness?
Answer: Annuities come in a variety of formats today. There are annuities
available with no penalty on withdrawals, even after only one year. Many
have 10 to 20 percent free annual withdrawal features available immediately
from the date of issue. Some allow total withdrawal without penalty for
catastrophic illness or long-term hospitalization or nursing home care.
Remind your prospect that annuities usually allow partial withdrawals with
a penalty charged only on the amount of the withdrawal, not on the entire
account balance, like bank CDs. Many annuities are penalty-free if the
annuitant dies. Be sure to make your prospect aware of this fact if he
expresses a concern about dying and having his money tied up.
Question: Should a prospect put all his eggs in one basket or one
fixed annuity?
Answer: Explain the difference between putting all his money in one stock
or bond as compared to buying an annuity through an insurance company
which has hundreds of different high-quality investments backing his
principal and interest.
Question: Won’t the client lose his principal if he dies while receiving
payout on an annuity?
Answer: Only if he selected a “life only” option, which would probably not
be practical or recommended by an agent. Modern annuity contracts have
many annuity payout options, including “interest only,” if that is all the
client wants. Also be sure the prospect understands the difference between
deferred and immediate annuities before moving beyond this misconception.
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Most retired
prospects are not
interested in
“playing the
stock market.”
Question: Don’t clients need growth in their portfolios such as stocks or
mutual funds may provide?
Answer: This is where you will need to help your prospect understand his
own risk tolerance to decide if he is a fixed, index or variable annuity prospect.
If you discover that he is very conservative and wants guaranteed
investments only, but someone has told him to take a risk in something he
may not understand, use the following analogy to help him choose the
right path. Remind your clients of the fable about the hare and the turtle.
The turtle may have been slow, but he finished the race. Many salespeople
today push growth, not fully explaining to a prospect that one losing year
every five or 10 in the stock market usually makes the stock or mutual
fund return similar to the steady compounded and tax-deferred return
received in a fixed annuity. Most retired prospects are conservative savers
looking for a slightly higher interest rate than their bank CD is paying.
They are not interested in “playing the market.”
Due to the low interest rates available today, many people are
contemplating investing in speculative investments. With the safety issue
being so prominent in the news today, consumers may even consider that a
guaranteed annuity is a speculative investment. The following two
sections will expand on guarantees vs. speculation and the insurance
industry safety issue.
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Guarantees vs. Speculation
O
ften your prospect will want to compare the performance of a taxdeferred annuity against the stock market, mutual funds, bonds or
some other investment with perceived greater value. You can help the
prospect by determining if he is a saver or an investor. If he is interested
in owning an investment that will have market risk and a daily fluctuating
value, he is an investor. However, if he describes himself as someone
looking for guaranteed principal and rate of return, he is a saver.
If he considers himself an investor, show him the following analysis of
speculation vs. a guaranteed rate of return. The speculator can achieve a
higher rate of return than the saver if he does not have a losing year
every five or 10 years. Since we live in very exciting financial times, it
is not uncommon to have wild fluctuations in the value of market-risk
type investments.
The following charts will help you and your prospect appreciate the
inherent risk in the stock market. You can use these charts to help your
client determine his risk tolerance and determine if he wants a fixed or
variable annuity. It is up to you and your client to determine which choice
is best for them.
This information will help you better serve your clients and perhaps
encourage you to further evaluate the individual portfolio managers' track
records if you are working with variable annuities.
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Investment Choice
Starting with a $100,000 investment, which series of gains or losses
will produce a higher amount in five years?
Year
Scenario A
Scenario B
1
+16%
+7%
2
+12%
+7%
3
+14%
+7%
4
-14%
+7%
5
+10%
+7%
The answer is that after five years, both scenarios will result in a balance of
about $140,000. Are you considering investing in any investment that has
market risk? Why indulge in speculation when you can have guaranteed
accumulation with a single premium deferred annuity?
You will find that most age 50-plus prospects are conservative savers who
would be very content with a fixed annuity’s steady guaranteed principal
and interest which averages 1 or 2 percent higher than the CD they most
likely own.
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Insurance Industry Safety Issue
I
t is important in these times of turmoil in the financial markets to keep
ia cool head. If we, as agents, cannot fully understand the barrage of
data being thrown at us by our own industry, how can we hope or expect
that our clients and prospects can derive a clear picture of the facts?
To better
understand the
strength of the
insurance
industry, it is
imperative to put
all the “media
hype” aside and
wade through
the facts.
To better understand the strength of the insurance industry, it is imperative
to put all the “media hype” aside and wade through the facts. Admittedly,
there are a few bad apples within our ranks. These companies have come
under intense scrutiny by the insurance departments in their state of
domicile. Those state insurance departments have also had their feathers
ruffled by angry citizens, politicians and federal bureaucrats pushing for
federal regulation of the insurance industry. All levels of the industry
from the top to the bottom have been affected.
The future will see fewer insurance companies as weaker ones are merged
with stronger ones or are closed by state regulators. Companies that
continue to be well-managed, innovative in product design and
progressive in marketing should grow substantially.
When analyzing the insurance industry, we can easily understand the
safety issue by relating it to our own net worth. If we were personally
experiencing hard times, we would assume our net worth would be
shrinking, perhaps due to lower income, investment losses, emergency
expenditures and a myriad of other factors. However, if we had growth in
our net worth each year, we would tend to ignore the doomsayers around
us and get on with the business at hand.
The life insurance industry’s net worth, its capital and surplus, has grown
steadily the past few years. When you understand the magnitude of an
industry with assets of over four trillion dollars, of which only a small
percentage is invested in problem assets, and only a small portion of those
are actually nonperforming, you begin to appreciate the real strength of
our industry.
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The total capital and surplus of the industry is approximately 5 percent of
assets, or about five times the amount of its problem investments.
Certainly insurance companies despise losing money in their investment
portfolios, but don’t think for a minute that they are in the disastrous
condition the media would have you believe.
You owe it to your clients to learn all you can about the real strength of
our legal reserve life insurance industry. You and your clients will be far
better off with a clear understanding of the facts. No financial industry
can withstand a “run on the bank” scenario that can be created by a
misinformed and panicky public. Insurance companies will continue to
throw money at the problem by taking out full-page advertisements
proclaiming their terrific safety record. But that is not good enough.
You, the agent, can help your clients and prospects only when you delve
into all the financial details concerning the companies you deal with.
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Taxable vs. Tax-Deferred Yields Equivalency
Tax-Deferred Yield of:
5%
Tax Bracket
6%
7%
equals a taxable yield of:
8%
15%
5.9%
7.1%
8.2%
9.4%
28%
6.9
8.3
9.7
11.1
31%
7.2
8.7
10.1
11.6
*This chart is for illustration purposes only. No future taxes or surrender charges
are considered.
See Success Strategy #1 for details about the above chart.
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Investment Features Comparison Chart
Fixed Rate
Single Premium
Deferred Annuity
Money Market
Fund
Certificate
of Deposit
Corporate
Bond
Is your principal
guaranteed?
YES
NO
NO
Is your money free
from market risk and
price fluctuations?
YES
FDIC Max
($100,000)
YES
NO
YES
NO
Is your interest
free from current
income taxes?
YES
NO
NO
NO
Is your interest
compounded and
reinvested automatically
with no current
income taxes?
YES
NO
NO
NO
Can you make small
additional contributions? NO/YES
YES
NO
NO
Can you ever make
cash withdrawals
without penalty?
YES
YES
NO
YES
Do you have to pay
commissions?
NO
NO
NO
YES
Is there a provision
to provide a guaranteed
lifetime income
with additional tax
advantages?
YES
NO
NO
NO
Is there automatic
avoidance of probate
expenses and delays?
YES
NO
NO
NO
*This chart is for illustration purposes only. Always ask for specific details and disclosures on various investments.
See Success Strategy #2 for details about the above chart.
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Triple Compounded Interest Earnings
on a $100,000 Investment
Years
Invested
$100,000
6% interest
$100,000
8% interest
$100,000
10% interest
1
106,000
$108,000
$110,000
5
133,823
146,933
161,051
10
179,085
215,892
259,374
15
239,656
317,217
417,725
20
320,713
466,096
672,750
25
429,187
684,848
1,083,471
30
574,349
1,006,266
1,744,940
This chart is for illustration purposes only. It is intended to help you understand the effect
of compounding interest without withdrawing a sum to pay current taxes. Future taxes
would still have to be paid at some point. Rates of return are hypothetical and not
guaranteed. They should be used for comparison purposes only.
See Success Strategy # 4 for details about the above chart and triple compounding.
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SPDA vs. CD
on a $100,000 Investment
SPDA 6%
interest
SPDA 8%
interest
CD 5.75%
interest
Less 28%
Tax Bracket
1
$ 106,000
$ 108,000
$ 104,140
5
133,823
146,933
122,486
10
179,085
215,892
150,029
15
239,656
317,217
183,765
20
320,713
466,096
225,088
25
429,187
684,848
275,702
30
574,349
1,006,266
337,697
35
768,609
1,478,534
413,633
40
1,028,572
2,172,452
506,644
45
1,376,460
3,192,045
620,570
50
1,842,014
4,690,161
760,114
55
2,465,030
6,891,386
931,036
Years
Invested
This chart is for illustration purposes only. It is intended to help you understand the effect
of compounding interest without withdrawing a sum to pay current taxes. Future taxes
would still have to be paid at some point. Rates of return are hypothetical and not
guaranteed. They should be used for comparison purposes only.
See Success Strategy # 4 for details about the above chart.
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A Plan to Produce Immediate
Tax-Favored Income and Tax-Deferred Growth
Original Premium
$100,000
split in the following manner
Amount to Immediate Annuity
To Provide Tax-Favored Income**
Amount to Deferred Fixed Rate
Annuity to Grow Tax-Deferred*
$29,750
Current
Interest Rate
$70,250*
7.35%
Guaranteed Monthly Income
Payable for 5 years
$583
Guaranteed Annual Income
$7,000
85% Tax Free***
5 years
Tax-Deferred Compounding
Will Grow To
Guaranteed Total Payout
$35,000
+
$100,151.29*
Total Return:
=
$135,151.29
* The above calculation is based on the current interest rate. Ask your representative for current rates and guarantee periods.
** The illustrated annuity income is based on current immediate annuity purchase rates which are not available indefinitely. Actual income will be in accord with the published rates
*** in effect at date of issue.
*** These figures are based on the assumption that the amount to be annuitized shown above is the tax basis of the policy.
*** NOTE: The tax results herein are based on interpretations of current tax law. There can be no assurance that these interpretations will prevail or that changes in tax law will not
*** affect the results shown. Always consult your professional advisor on matters of taxation.
See Success Strategy # 6 for details about the above chart.
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$100,000 at 8%
CD
Year
CD
Value
Income
(8%)
After-Tax
Income
10
15
20
$ 171,139
223,883
292,884
$ 13,691
17,911
23,431
$ 9,447
12,358
16,167
ANNUITY
Annuity
Value
Income
(8%)
After-Tax
Income
%
Increase
$ 215,892
317,217
466,096
$ 17,271
25,377
37,288
$ 11,917
17,510
25,728
+ 26%
+ 42%
+ 59%
*Note: The tax results herein are based on interpretations of current tax law. There
can be no assurance that these interpretations will prevail or that changes in tax
law will not affect the results shown. Always consult your professional advisor on
matters of taxation.
See Success Strategy # 7 for details about the above chart.
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Real Return on a CD
The actual percentage returned on a Certificate of Deposit after taxes and less inflation.
CD Rate
Less
Taxes of
Less
Inflation
Rate of
Actual
Return
8%
7
6
5
4
28%
28
28
28
28
2%
2
2
2
2
3.76%
3.04
2.32
1.6
.88
* This chart is for illustration purposes only. It shows hypothetical examples of various CD
rates and takes into consideration the tax and inflation effects on the rate of return.
See Success Strategy # 7 for details about the above chart.
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The Cost of Liquidity
CD
$50,000
ANNUITY
$50,000
Year 1
5%
$2,500.00
$52,500.00
6%
$3,000.00
$53,000.00
Year 2
5%
$2,625.00
$55,125.00
6%
$3,180.00
$56,180.00
Year 3
5%
$2,726.25
$57,881.25
6%
$3,370.80
$59,550.80
Year 4
5%
$2,894.06
$60,775.31
6%
$3,573.05
$63,123.89
Year 5
5%
$3,038.76
6%
$3,787.43
Total
$63,814.08
Total
$66,911.28
Advantage over CD
+$3097.20
*This chart is for illustration purposes only. No future taxes or surrender charges
are considered.
See Success Strategy # 7 for details about the above chart.
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See Success Strategy # 7 for details about the above chart.
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MARKETING
TROUBLE
SHOOTING
Marketing Trouble Shooting
T
his section will show you the major mistakes often made in creating a
marketing plan and, in turn, will give you the key ingredients to use in
creating a successful marketing piece.
The three biggest mistakes most financial salespeople make in their
marketing plans are as follows:
#1 Attempting to sell a prospect your products in a marketing piece. You
should only be trying to initiate a response from the prospect, whether it
be to get more information, attend a seminar or hear a sales presentation.
In other words, marketing and advertising techniques are only effective in
the financial services industry if they are created to motivate a qualified
prospect to act and find out more about your interesting offer. The sales
presentation is your job and will only take place if a qualified prospect
has been motivated to contact you.
The typical salesperson attempts to explain his product or company in
detail in a marketing or advertising piece. This attempt at selling usually
fails to gain the prospect's attention because the salesperson didn't get a
chance to overcome the prospect's initial objections and misconceptions.
This failure usually causes the salesperson to think marketing or
advertising in any format won't work.
Annuity prospects have so many misconceptions about annuities and the
insurance industry that anything accentuating those issues fails miserably
and the salesperson never gets a chance to overcome the misconceptions
and make a presentation.
The following analogy will help clarify this point. If you advertise that
your company has a great tax-deferred annuity along with great features
of the annuity that you and your company are very proud of, a person
reading your ad will immediately let his misconceptions and objections
about annuities, tax-deferral and insurance companies overrule any
curiosity he may have had about your ad.
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On the other hand, if you had asked “Would you like to learn how
millions of Americans have stopped paying current income taxes on their
interest earnings?” in your ad, and offered free information to find out
more details, you would have peaked a qualified prospect’s attention and
motivated him or her to act now and call for more information. This offer
is not attempting to sell your product, it is only attempting to motivate
qualified prospects to call you for more information.
The advertisement cannot sell your product for you. It can only generate a
response to put a qualified prospect in front of a salesperson. The
salesperson is trained to teach the prospect a new financial concept and
overcome misconceptions and objections that may come up during the
presentation.
Remember, we are discussing marketing and advertising techniques for
annuities. This doesn’t mean you can’t sell a consumer product through a
marketing or advertising piece. Billions of dollars of clothing,
electronics, hardware, furniture, food, books and a wide variety of other
products are sold directly from catalogs, newspaper ads, flyers, magazine
ads and many other forms of marketing and advertising.
Annuities, on the other hand, can be viewed as a big ticket item usually
sold by a salesperson through some method of presentation. During the
presentation, the salesperson has the opportunity to overcome
misconceptions and objections and close the sale.
#2 The second biggest mistake salespeople make in their marketing plans
is not focusing on the correct target market. This can best be described by
evaluating a mail piece campaign that generates a very poor response or
no response at all. The salesperson can’t figure out why a mail piece that
supposedly worked for someone else, failed for him.
If the piece itself has already proven successful in other markets, it
should work reasonably well in your market. Thus, if your direct mail
piece fails, it was probably because you didn't select the right target
market for the mailings.
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Many salespeople buy names from mail list services and usually end up
buying the wrong list. They buy the names of people in their area who
make over $35,000 or $50,000 or $100,000 and who are in the highest tax
brackets. These people usually have stockbrokers, financial planners,
bankers, trust departments and a variety of other financial services
relationships in place. It is hard to motivate these people to react to your
direct mail message because they feel they don't need your services.
This problem is compounded by the fact that the list service also assumes
the high income, high tax bracket person is the best prospect for whatever
the salesperson is trying to sell. For example, the best list for fixed rate
annuities is made up of people age 55 and above with little or no taxable
income. They live on Social Security, have their homes paid for, have
money in bank CD’s and savings accounts and are easily motivated to
respond to a good marketing piece if they believe it is a better deal for
their money. This is the profile of the average fixed annuity buyer and is
consistently missed by the annuity salesperson and the mail list services.
The point here is to make sure you have your target market well defined
for the product you are selling before creating your marketing piece and
selecting your advertising medium. Don't make the same mistake
hundreds of salespeople have made over and over again.
#3 The third mistake salespeople make is not using the key ingredients
that make up a successful marketing piece. There are several important
parts to an effective marketing piece. Generally they must also be in a
specific order to work properly. The following section will outline each
of them in detail.
First, every good marketing piece needs a Bold Attention Getting
Headline. This headline must accomplish several things. It is usually a
short phrase or sentence that should qualify your prospect, peak his
curiosity and convince him to read the rest of the message. A larger,
block style type usually catches the eye of prospects.
Many people make the mistake of thinking their business or product name
is the Bold Attention Getting Headline. This is institutional advertising
and will not convince the reader to read the rest of your message. Read
through your newspaper and notice how many people make this mistake
in their advertising. Following are examples of good headlines to reach
hot annuity prospects.
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“Do you have a CD Maturing?”
“Would you like to learn how Millions of Americans have stopped paying
current income taxes on their interest earnings?”
“Find out the three best ways to beat low interest rates.”
“Learn about the little unknown investment your banker has that pays
50% more interest than CD’s.”
“Learn about a safe investment that beats low bank rates, avoids probate,
state inheritance tax (where applicable) and current income taxes.”
These headlines qualify your prospect, because you want people with
money to call you, not just a lot of people who will take up your sales
time. These headlines also peak the prospect’s curiosity and help
convince him to read on and find out more.
When you create your Bold Attention Getting Headline, remember to
think like your prospect. Write things that are important to him, not you.
Think of his problems, not yours. Get inside his mind, not yours.
The second key ingredient in your marketing piece should be an attractive
offer that will make your prospect’s life better, richer and more rewarding.
For example:
A higher interest rate than he or she is earning now
A free report on how to lower taxes
A list of several ways to beat low interest rates
A free booklet on avoiding probate
A free pamphlet showing how to make your assets exempt
from state inheritance taxes (where applicable)
A free video or cassette tape that teaches how to avoid
current income taxes on your interest earnings
A free pamphlet about wills and trusts
A free seminar to learn about any of the above subjects
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The best offers are usually non-selling information that offer your
prospect something that will make life better, richer and more rewarding.
They are a benefit you can offer the prospect, not just a feature of your
product. Features are things you understand about your product.
Describing the benefit your prospect will enjoy from those features is
what is important to your prospect.
Think again about the word "tax-deferred." The prospect is confused
about that feature. You should say something like, “No more 1099’s at
year end— pay the tax when you want, not when Uncle Sam wants” or
“Let your tax savings compound with interest for you” or “Tax deferred
growth will give you a much larger nest egg in the future, resulting in a
much larger monthly income.” Now your prospect sees a benefit geared
toward making his life better. Always describe benefits, not features, to
your prospect.
The third key ingredient in your marketing piece is the Call to Action,
where you motivate your prospect to act immediately. The prospect is
made aware that in order to take advantage of your offer, he or she must
act immediately.
This part of your marketing piece tells your prospect what action he must
take to receive his free information, get more details, make a reservation
or do whatever is required to take advantage of your offer.
The fourth key ingredient usually follows the Call to Action line. It can
be a variety of things that make your business appealing and easy to do
business with. Having a toll free number, an easy-to- locate office, a no
cost or obligation phrase or a postage paid return card included are all
ways of making your business more inviting to your prospect. Telling the
prospect there is no cost or obligation shows there is no pressure to buy.
The fifth and final key ingredient in a successful marketing piece is its
credibility ingredient. A business name is usually better than a person's
name. A professional logo and a reputable business address will help the
prospect feel comfortable about the credibility of your offer.
Post office boxes can scare away a prospect who has been used to dealing
with a large brick and mortar bank building and is considering moving his
$50,000 CD to a better investment.
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If you work out of your home, avoid this problem by using marketing
techniques that do not require you to have an office. This may involve
seminars or trade shows, using return cards on mailers, telemarketing, a
free recorded message on a voice mail system or many other methods that
do not require you to have an office for prospects to call or walk into.
A third party endorsement is another great credibility booster. When a
prospect sees that someone else is living life better, richer and more
rewarding by dealing with your company, his belief in your message is
reinforced and he is more motivated to act.
These ingredients apply to many different marketing applications. You
can even apply the same guidelines to a cold call, a telemarketing script,
or a face to face conversation.
For example: Hello, Mr. Prospect.... Would you like to learn how
millions of Americans have stopped paying current income taxes on their
interest earnings?....... We would like to mail you a copy of a video tape
that describes how people just like you have stopped paying current
income taxes on their interest earnings. They are using a simple, legal
method that you can learn about in the privacy of your own home without
any pressure. There is absolutely no cost or obligation on your part. May
I send one out to you?....Very well, thank-you, and let me verify your
address so we can get your tape out today.
The script can be written for whatever you decide to promote. If you
follow these keys to designing a successful marketing piece, you will
have better results from any type of marketing you use.
If you are looking for a magic wand or secret technique to dramatically
increase your marketing results, you have just finished reading about it.
Avoiding these three major mistakes and including the key ingredients listed
above will help you create much better marketing pieces for your business.
These ideas are not new— they are thousands of years old. Appealing to
people's emotions, peaking their curiosity and motivating them to do
something has been done throughout history in order to market and sell
the most successful products and services ever.
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Think of the emotional appeal companies like Nike, McDonalds, Sony,
Pepsi, Chevrolet, AT&T, United Airlines, and Wal-Mart use. Each of
these companies appeals to you with a powerful emotional message
geared to make your life better, richer and more rewarding.
You can look back through our country's history and remember the most
successful products from their advertising messages. Most of the
company's in charge of marketing these products used some kind of
emotional appeal. This is the magic wand and secret you've been looking
for. It is being used by many life insurance and annuity salespeople to
generate hundreds of thousands, if not millions, in commissions. The
proof is in our large and growing endorsement list. You can apply these
ideas to your business, and Moneytalks can help you.
Use this section to troubleshoot your marketing piece. We encourage you
to reread the previous section on the mistakes and key ingredients many
salespeople make when you start preparing new marketing pieces or finetuning existing ones. The next section includes helpful hints for using
various advertising mediums, and also a section on handling incoming
prospect phone calls, along with recommendations on what to send out to
prospects when they ask you to just mail them information.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Helpful Hints
Newspaper Advertising
Avoid trying to sell your product in the ad.
Choose the newspaper that will reach your target market.
Your major city newspaper is probably best. Avoid shoppers and free
give-away papers.
Include the key ingredients necessary for success when creating an ad.
Place your ad in the sections most widely read by your target audience.
Example: fixed annuity prospects read business and financial pages and
obituaries.
When do you reach the biggest share of your target market? For
example,the Sunday paper is usually purchased by people who do not
subscribe, so you get increased circulation on your ad. Tuesday is the first
day financial information from Monday is printed. This may be the day
banks advertise their rate changes. Check your paper to decide which are
the best days to reach your target market.
Run the ad as often as your budget allows. If it’s a successful ad, the
more frequently you run it, the more calls you get. The most successful
salespeople using newspaper advertising run their ads daily in small
papers (circulation up to 50,000) two or three times a week (circulation
50,000 to 150,000) and maybe once a week in papers with circulations
over 150,000.
You can usually get substantial discounts by running your ad several
times in the same week.
Have your ad approved by your insurance company. Disclosure
statements are required by most state insurance divisions if you mention a
product or interest rate in an advertisement. Some states restrict the use
of certain words in promotional material. Know the rules in your state
and follow them carefully.
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Have your ad professionally designed by the newspaper. Don’t try to hand
design something on your computer. Let their creative and graphics
department help you design your ad, but make sure it contains all the key
ingredients necessary for success.
Use small ads on a frequent basis, instead of one large one.
Distinctive and frequent ads are more important than size.
Test new ads, but don’t stop running an ad just because call activity drops
slightly. It still may be better than no calls at all. Calculate how much
money you are bringing in from the ad compared to how much the ad is
costing you. Compare those figures to other prospecting methods you
have used. This is a test for successful advertising.
Some people get three or four dollars for every dollar they spend on their
ads, and others get 10 times or more the advertising cost. There are a lot
of variables and it may take you a little time to test your ads and fine-tune
your results.
Review the Annuity Marketing Strategies guidebook section and the
Annuity Marketing Strategies audio tape.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Radio or Television Advertising
Avoid trying to sell your product in your ad. A free offer for literature,
audio or video tapes or other non-selling information is best.
Be very selective about the radio station or the television programming
you choose. Make sure you hit your target prospects. Ask the advertising
salesperson for help with this.
Choose your time slots carefully to reach the highest percentage of your
target prospects. Ask the advertising salesperson for help with this also.
Make sure you have reviewed the key ingredients to a successful
marketing piece when you prepare your message.
Try to find a well-known national or local celebrity to read your ads. His
or her voice will build credibility for your message.
Test various length ad spots to see which works best for you. It may be
30 or 60 seconds or maybe just a stationary message during the hourly
newsbreak on your local TV station.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Direct Mail
Avoid trying to sell your product in your mail piece.
A free offer of literature, audio or video tapes, free seminars or other nonselling information is best.
Make sure you have the right list to reach your target market. Don’t
assume the person who is selling you the list knows your ideal prospect
better than you do. Double check this part of your mail campaign— it is
one of the most frequent mistakes made by annuity salespeople today.
Make sure you have the key ingredients for a successful marketing piece
included and in the right order in your mailer.
Use a simple postcard or flyer because they won't have to be opened by
your prospect. Your message is in front of your prospect when he or she
picks up the mail. If you do use a personal letter, start it out with a Bold
Attention Getting Headline to convince the prospect to read the rest of
your offer.
Get help from a local bulk mail expert to save money on postage.
Test different mailers to see which one works best for you.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Handling Incoming Calls From Prospects.
Have the Overcoming Misconceptions and Objections section of the
MONEYtalks guidebook open in front of you when you take a call from a
prospect. If you are out selling, teach others in your office to use that
section to handle callers.
Discuss the benefits of your products and services in general. Avoid
being specific about one product and ask for an appointment to show
them the details.
Ask questions to uncover a prospects real misconceptions or objections.
For example: When they say, “I don’t want to tie my money up,” ask
them if they are concerned about interest rates going up, or if they need
all their money back in a year or two. This will bring out the real
concerns and you can address it from the answers in the guidebook.
It may take a few calls before you become successful at turning call-in
prospects into appointments. Practice on a few of your relatives or
friends before you spend your marketing dollar.
If you don’t have an office or receptionist, use an answering service that
answers your calls, using your business name. This is crucial if you are
targeting a people 55+ who have been used to dealing with people in a
bank building or other financial office. They will not leave messages on
answering machines.
Ask your answering service to tell callers you are with a client and you
will call them back. If they don’t want to leave a message, have the
answering service tell them you will be glad to mail out a free information
packet without obligation. This is a low key, no pressure way of getting a
name, address and phone number so you can call back later.
If you use voicemail or an answering machine, the following page shows
a few sample outgoing messages to get ideas from.
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SAMPLE OUTGOING MESSAGES FOR
VOICE MAIL AND ANSWERING MACHINES
Hi, you have reached XYZ Financial Services. If you have called for
our Free report outlining How Millions of Americans Have Stopped
Paying Current Income Taxes on their Interest Earnings, then please
leave your name, address, phone number after the beep and we'll gladly
send you our Free report. If you need to reach us about another matter
then leave a detailed message and we will promptly return your call.
Thank you, and have a good day!
Hello, you have reached XYZ Financial Services. If you have called
for our Free report outlining the Four Best Investments in America
Today, then please leave your name, address, phone number after the
beep and we'll gladly send you our Free report. If you need to reach us
about another matter then leave a detailed message and we will
promptly return your call. Thank you, and have a good day!
Hi, you have reached XYZ Financial Services. If you have called on
our ad about CD or IRA alternatives, please leave your name, address,
phone number after the beep and we'll mail you a Free report outlining
several alternatives we have available. If you need to reach us about
another matter then leave a detailed message and we will promptly
return your call. Thank you, and have a good day!
Hi, you have reached XYZ Financial Services. If you have called for
our free audio cassette by Paul Strassels, a nationally respected
consumer advocate, that tells you how millions of Americans have
stopped paying current income taxes on their interest and social
security earnings, then please leave your name, address, phone number
after the beep and we'll gladly send the free tape to you without cost or
obligation. If you need to reach us about another matter then leave a
detailed message and we will promptly return your call. Thank you,
and have a good day.
NOTE: Insert your free tape or materials in these scripts, or order the
Paul Strassels interview tape from our office.
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What to Mail Out to a Call-In Prospect
If you can’t get an appointment when a prospect first calls, and he or she
just wants you to mail information, don’t mail out computer print-outs and
product brochures. Your prospect probably doesn’t know what an annuity
is yet, so you need to start with the basics. Remember to teach and sell
concepts, not products.
The best things to mail out are video tapes, audio tapes, or pamphlets
explaining the great benefits of tax-deferred growth. Other good items
include historical interest rate comparisons between annuities and CD’s,
or a chart that compares annuity benefits and features to other
investments. Include a personal letter introducing yourself and your
company. You can also tell the prospect you will call in a week or so to
follow up and help them with any questions they have.
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Sample Marketing Pieces
Following are many marketing pieces that will give you ideas to follow
when creating a successful piece for your business. Remember there are
many different ways to market annuities and other insurance products.
One way may be better for you than another.
Every salesperson has unique circumstances that will point you in a
direction you feel most comfortable with. The techniques described in
MONEYtalks are working very successfully for thousands of our
customers. They will work for you if you study them carefully, test them
thoroughly, and fine-tune them for your marketplace.
Always get your ads approved
by the insurance company
if you advertise their product.
This is usually a State
Insurance or Commerce
Division requirement. Make
sure you follow your state laws.
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Newspaper Ads
CD or IRA
CDor IRA
How About
How About
Maturing?
0.00%
*
Guaranteed 1 Year
CALL NOW FOR DETAILS
000-0000
or 1-800-000-0000
NO COST OR OBLIGATION
XYZ FINANCIAL SERVICES
456 SOME PLACE, SUITE 105,
ANYWHERE, USA 12345
*Include disclosure statement about your product
supplied by your company.
CD or IRA
Maturing?
How About
0.00%
*
Guaranteed 1 Year
CALL NOW FOR DETAILS
000-0000
or 1-800-000-0000
NO COST OR OBLIGATION
XYZ FINANCIAL SERVICES
456 SOME PLACE, SUITE 105,
ANYWHERE, USA 12345
*Include disclosure statement about your product
supplied by your company.
Maturing?
0.00%
*
1 Year Guaranteed
Principal & Interest
Guaranteed
Call for more details
000-0000
or 1-800-000-0000
Your Business Name
Your address
*Include disclosure statement about your product
supplied by your company.
Is Your CD or IRA
About to Roll Over
and Play Dead?
How Safe Is An Investment
That Guarantees You A Loss?
With Today's CD Rates, After
Taxes And Inflation You're
Actually Losing!
Call 1-800-000-0000
for a free recorded message that
will explain how millions of
Americans have stopped paying
current income taxes on their
interest earnings.
.
Call Now: 1-800-000-0000
NO OBLIGATION
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CDMaturing?
or IRA
Find out the three
best ways to beat
low interest rates.
CALL NOW FOR
YOUR FREE REPORT
Call 000-0000
or 1-800-000-0000
NO COST OR OBLIGATION
OR IRA
CD
MATURING?
JUST SAY NO
Is Your CD or
IRA About to
Roll Over and
Play Dead?
LEARN ABOUT THE LITTLE
UNKNOWN INVESTMENT
YOUR BANKER HAS THAT
PAYS 50% MORE INTEREST
THAN CD'S!
Call now for a free
cassette tape that
tells you how.
OR IRA
CD
MATURING?
FREE
INTEREST RATE HOT-LINE
CALL NOW
FOR A FREE
AUDIO CASSETTE.
Learn about safe guaranteed
alternatives that can earn
1.5% - 2.0% higher than you are
currently earning on your savings
Learn how your savings
could be earning
substantially more.
RATES UPDATED DAILY
Absolutely no cost or obligation.
Call now for a free
recorded message and learn
about the little unknown
investment your banker
has that pays 50% more
interest than CD'S!
.
Call Now: 1-800-000-0000
or 000-0000
NO OBLIGATION
TO LOW RATES ON YOUR MONEY!
CALL NOW
FOR A FREE TAPE
000-0000
or 800-000-0000
Is Your CD or
IRA About to
Roll Over and
Play Dead?
.
Call Now: 1-800-000-0000
NO OBLIGATION
OR IRA
CD
MATURING?
DON'T
LET YOUR HARD EARNED MONEY
ROLL OVER AND PLAY DEAD!
CALL NOW AND LEARN
5 SAFE AND EASY
WAYS TO BEAT LOW
SAVINGS RATES.
CALL NOW
FOR MORE DETAILS
000-0000
or 800-000-0000
CALL NOW
FOR A FREE
AUDIO CASSETTE
000-0000
or 800-000-0000
Absolutely no cost or obligation.
Absolutely no cost or obligation.
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CD ring?
Matu
HOW ABOUT
0.00%*
Guaranteed
1 Year
NO FEES! NO SALES CHARGES!
GUARANTEED PRINCIPAL & INTEREST RATE
INCOME OPTIONS AVAILABLE.
The sensible alternative to volatile
stocks and bonds.
Also available for IRA’s
and other qualified plans.
Call now for more information!
g?
D
n
i
C r
atu
M
HOW
ABOUT
0.00%*
NO FEES! NO SALES CHARGES!
GUARANTEED PRINCIPAL
& INTEREST RATE
Available for IRA’s or
regular savings dollars.
FIND OUT THE
THREE BEST WAYS
TO BEAT LOW
INTEREST RATES
Call now for more information!
Toll free 1-800-000-0000
Local calls 000-0000
Toll free 1-800-000-0000
Local calls 000-0000
Your company name
and address here
Your company name
and address here
*Include disclosure statement about your
product supplied by your company.
* Include disclosure statement about your
product supplied by your company.
CDMaturing?
or IRA
Learn about a safe
investment that beats low
bank rates, avoids
probate, state inheritance
tax (where applicable) and
current income taxes.
CALL NOW FOR A
FREE BOOKLET.
000-0000
or 1-800-000-0000
NO COST OR OBLIGATION
Is Your CD or
IRA About to
Roll Over and
Play Dead?
WOULD YOU LIKE TO LEARN
HOW MILLIONS OF
AMERICANS HAVE STOPPED
PAYING CURRENT INCOME
TAXES ON THEIR INTEREST
EARNINGS?
Call now for a free
video tape that tells
you how.
.
Call Now: 1-800-000-0000
or 000-0000
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D
C
HOW ABOUT
?
g
n
i
r
u
t
Ma
*
0.00%
Guaranteed
One Year
Guaranteed Principal & Interest Rate
NO FEES! NO SALES CHARGES!
Would you like to learn how Millions of
Americans have stopped paying current
income taxes on their interest earnings?
Call now for a free report!
Toll free 1-800-000-0000 Local calls 000-0000
YOUR COMPANY NAME & ADDRESS HERE
* Include disclosure statement about your product supplied by your company.
HOW ABOUT
CD
?
g
n
i
r
u
t
Ma
*
0.00%
Guaranteed
One Year
Guaranteed Principal & Interest Rate
NO FEES! NO SALES CHARGES!
Learn about a safe investment that beats
low bank rates, avoids probate, state inheritance
tax (where applicable)and current income taxes.
Call now for a free cassette tape!
Toll free 1-800-000-0000 Local calls 000-0000
YOUR COMPANY NAME & ADDRESS HERE
* Include disclosure statement about your product supplied by your company.
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NOTICE
This rate will drop
after Nov. 10, 2008
0.00%
*
Guaranteed One Year
NO FEES! NO SALES CHARGES!
GUARANTEED PRINCIPAL
& INTEREST RATE
Available for IRAs or regular savings dollars.
Call now for more information!
Toll free 1-800-000-0000
Local calls 000-0000
Your company name
and address here
LEARN HOW MILLIONS
OF AMERICANS HAVE
STOPPED PAYING
CURRENT INCOME
TAXES ON THEIR
INTEREST EARNINGS.
Call for a free tape and
find out what a
nationally respected
consumer advocate
says is the investment
of the New Millenium.
Toll free 1-800-000-0000
Local calls 000-0000
NO OBLIGATION
*Include disclosure statement about your
product supplied by your company.
Do You Have a
CD Maturing?
How
about
0.00%*
NO FEES! NO SALES CHARGES!
GUARANTEED PRINCIPAL
& INTEREST RATE
Call now for more information!
Toll free 1-800-000-0000
Local calls 000-0000
Your company name
and address here
*Include disclosure statement about your
product supplied by your company.
DO YOU HAVE
A CD MATURING?
How
about
0.00%*
NO FEES! NO SALES CHARGES!
GUARANTEED PRINCIPAL
& INTEREST RATE
Call now for more information!
Toll free 1-800-000-0000
Local calls 000-0000
Your company name
and address here
*Include disclosure statement about your
product supplied by your company.
Success, Inc. All Rights Reserved
Find out the three best ways
to beat low interest rates.
Learn about a safe investment that
beats low bank rates, avoids probate,
state inheritance tax
(where applicable).
Call now for a free pamphlet!
You will also learn how millions of Americans
have stopped paying currrent income
taxes on their interest earnings.
Toll free 1-800-000-0000 Local calls 000-0000
50 E
In % Marn
ter o
est re
NO OBLIGATION
Learn about
the little unknown
investment your banker
has that pays 50% more
interest than CD's.
Call now for your free report!
Toll free 1-800-000-0000
Local calls 000-0000
Free with no obligation!
Success, Inc. All Rights Reserved
Co
St ab nc
oc ou er
k M t ne
th d
ar e
ke
t?
Learn how to
avoid risk, avoid
probate, and make
your money exempt from
state inheritance taxes.
(where applicable)
Call now for your free report and find out what a nationally
respected consumer advocate says is
"The Investment Of The New Millennium"
Toll free 1-800-000-0000 • Local calls 000-0000
Free with no obligation!
Social Security Being Taxed?
Learn how millions of
Americans have stopped
paying current
income taxes on their
social security earnings.
Call now for a free report.
Toll free 1-800-000-0000 Local calls 000-0000
NO OBLIGATION
Success, Inc. All Rights Reserved
MARKETING
TROUBLE
SHOOTING
Radio Ads
(:30 PROMO #1)
DON’T GET CAUGHT LETTING YOUR MONEY SIT AT TODAY'S LOW
INTEREST RATES WHILE YOU’RE HOPING THE RATES WILL GO UP SOON.
EVERY DAY YOU WAIT, YOU LOSE TO TAXES AND INFLATION. THE
EXPERTS TELL US RATES COULD STAY DOWN FOR YEARS TO COME.
THERE ARE SAFE ALTERNATIVES PAYING HIGHER RATES THAT YOU CAN
LEARN ABOUT FREE. CALL NOW AND RECEIVE “QUESTIONS AND
ANSWERS ABOUT ANNUITIES,” A CASSETTE TAPED INTERVIEW BY
AWARD-WINNING CONSUMER ADVOCATE PAUL STRASSELS. IT’S FREE
AND CAN BE MAILED TO YOU WITH NO OBLIGATION FROM
________________________(YOUR NAME) CALL ____________________(YOUR
NUMBER). THAT’S __________________. DON’T DELAY!!!
(:30 PROMO #2)
AWARD-WINNING CONSUMER ADVOCATE PAUL STRASSELS FEELS SO
STRONGLY ABOUT YOUR NEED FOR QUALITY, UNBIASED ANSWERS TO
YOUR INVESTMENT QUESTIONS, HE’S AUTHORIZED A COPY OF HIS
INTERVIEW TAPE ABOUT GUARANTEED ANNUITIES TO BE MADE
AVAILABLE TO YOU ABSOLUTELY FREE, COURTESY OF
__________________(YOUR NAME). IF YOU ARE TIRED OF LOW INTEREST
RATES ON YOUR MONEY AND WOULD LIKE TO LEARN HOW YOU CAN
EARN SUBSTANTIALLY MORE, WITH GUARANTEED PRINCIPAL AND
INTEREST, AND STILL HAVE EASY ACCESS TO YOUR MONEY, CALL
__________________(YOUR NAME) AT ______________(YOUR NUMBER). THAT
NUMBER AGAIN, ________________, TO RECEIVE YOUR FREE COPY OF PAUL
STRASSELS’ INTERVIEW ABOUT GUARANTEED ANNUITIES.
Note: Insert your free tape or materials offer in these ads, or order the Paul Strassels
interview tape from our office.
Success, Inc. All Rights Reserved
MARKETING
TROUBLE
SHOOTING
(:30 PROMO #3)
WHEN IT COMES TO YOUR MONEY, WHAT WORKS ANYMORE? WHERE
CAN YOU INVEST YOUR NEST EGG, EARN A DECENT RETURN, HAVE EASY
ACCESS TO YOUR FUNDS AND SAVE ON YOUR TAXES? YOU DON’T HAVE
TO SETTLE FOR TODAY'S LOW INTEREST RATES WHEN YOU COULD BE
EARNING SUBSTANTIALLY MORE – GUARANTEED, NO FEES, NO CHARGES,
EVER. YOU OWE IT TO YOURSELF TO LEARN MORE ABOUT GUARANTEED
ANNUITIES. CALL __________________________________(YOUR NAME)
AT _______________________(YOUR NUMBER), AND ASK FOR “QUESTIONS
AND ANSWERS ABOUT ANNUITIES,” A FREE CASSETTE TAPE OF AN
INTERVIEW WITH AWARD-WINNING CONSUMER ADVOCATE PAUL
STRASSELS.
(:30 PROMO #4)
DO YOU CURRENTLY OWN AN ANNUITY, OR ARE YOU CONSIDERING
INVESTING IN ONE? IF SO, YOU MUST RECEIVE A FREE COPY OF THE PAUL
STRASSELS INTERVIEW ABOUT GUARANTEED ANNUITIES. IT WILL BE
MAILED TO YOU FREE WITH ABSOLUTELY NO OBLIGATION. LEARN HOW
TO CHECK OUT THE SAFETY OF THE ANNUITY COMPANY. FIND OUT IF
YOU CAN MOVE YOUR ANNUITY TO ANOTHER COMPANY WITHOUT
PENALTY. CALL _____________________________(YOUR NAME) TODAY TO
RECEIVE YOUR FREE COPY OF THE PAUL STRASSELS INTERVIEW. CALL
____________________(YOUR NUMBER) OR TOLL FREE 1-800-000-0000.
Note: Insert your free tape or materials offer in these ads, or order the Paul Strassels
interview tape from our office.
Success, Inc. All Rights Reserved
MARKETING
TROUBLE
SHOOTING
(:30 PROMO #5)
HI FOLKS, THIS IS ______________________(YOUR NAME OR A CELEBRITY).
DO YOU OWN A CD OR AN ANNUITY? OR ARE YOU CONSIDERING
INVESTING IN AN ANNUITY? WELL, DON’T DO ANYTHING UNTIL YOU
HAVE HEARD THE FREE CASSETTE TAPE, “QUESTIONS AND ANSWERS
ABOUT ANNUITIES,” BY AWARD-WINNING CONSUMER ADVOCATE PAUL
STRASSELS. THIS TAPE WILL EXPLAIN WHAT ANNUITIES ARE, HOW TO
CHECK OUT THE STRENGTH OF YOUR ANNUITY COMPANY AND HOW
MILLIONS OF AMERICANS HAVE STOPPED PAYING CURRENT INCOME
TAXES ON THEIR INTEREST EARNINGS. FOR YOUR FREE COPY,
CALL ____________________(YOUR NAME) AT_______________(YOUR NUMBER).
THAT’S____________________________.
(:30 PROMO #6)
NOW YOU CAN LEARN HOW MILLIONS OF AMERICANS HAVE STOPPED
PAYING CURRENT INCOME TAXES ON THEIR INTEREST EARNINGS IN ONE
OF AMERICA'S BEST SAFE INVESTMENTS. WE WILL MAIL YOU A COPY OF
AN AWARD-WINNING CONSUMER ADVOCATE’S INTERVIEW WHERE YOU
WILL LEARN HOW TO BEAT TODAY'S LOW INTEREST RATES WITH NO FEES
OR COMMISSIONS CHARGES AND RECEIVE TAX AND ESTATE BENEFITS,
LIQUIDITY AND MORE. EVERY DAY YOU WAIT YOU LOSE TO TAXES AND
INFLATION. DON'T DELAY. CALL_________________(YOUR BUSINESS NAME)
NOW FOR YOUR FREE TAPED INTERVIEW. CALL ________________(YOUR
PHONE NUMBER). THAT'S _______________________(YOUR PHONE NUMBER).
Note: Insert your free tape or materials offer in these ads, or order the Paul Strassels
interview tape from our office.
Success, Inc. All Rights Reserved
MARKETING
TROUBLE
SHOOTING
(:60 PROMO #7)
DID YOU KNOW THAT YOUR SOCIAL SECURITY CAN BE
TAXED? WOULD YOU LIKE TO LEARN HOW MILLIONS OF
AMERICANS HAVE STOPPED PAYING INCOME TAXES ON THEIR
INTEREST AND SOCIAL SECURITY EARNINGS? CALL NOW FOR
A FREE AUDIO CASSETTE THAT TELLS YOU HOW. DON'T LET
THE GOVERNMENT DEPLETE YOUR RETIREMENT RESOURCES
WHEN THAT MONEY CAN WORK FOR YOU. LEARN HOW TO
INVEST THAT SAME MONEY, EARN AN EXCELLENT RETURN
AND HAVE EASY ACCESS TO YOUR FUNDS. SO IF YOU WANT
TO PLAN FOR A SECURE FUTURE, CALL _______________ TODAY
AND RECEIVE AN AUDIO CASSETTE BY PAUL STRASSELS, A
NATIONALLY-RESPECTED CONSUMER ADVOCATE. THERE IS
NO COST AND NO OBLIGATION! STOP PAYING INCOME TAXES
ON YOUR INTEREST AND SOCIAL SECURITY. CALL TODAY TO
_______________ OR TOLL FREE _______________.
(:60 PROMO #8)
ARE INTEREST RATES CAUSING YOU TO LOSE MONEY? ARE
YOU CONCERNED ABOUT THE STOCK MARKET? IF YOU'RE AN
INVESTOR, YOU HAVE TO BE! LEARN HOW TO INVEST YOUR
MONEY SAFELY, AVOID PROBATE, AND GET A HIGHER
INTEREST RATE THAN YOUR CD OR IRA PRODUCES. CALL NOW
FOR YOUR FREE AUDIO CASSETTE EXPLAINING WHAT A
NATIONALLY-RESPECTED CONSUMER ADVOCATE SAYS IS
"THE INVESTMENT OF THE NEW MILLENNIUM"! CALL
_______________ TODAY, THAT'S _______________, OR TOLL FREE
_______________. FREE INFORMATION WITH NO OBLIGATION IS
JUST A PHONE CALL AWAY. XYZ FINANCIAL SERVICES WILL
SEND YOU THIS VITAL INFORMATION-- YOU JUST HAVE TO LET
US KNOW THAT YOU WANT IT! SO IF YOU'RE CONCERNED
ABOUT THE MARKET AND YOUR MONEY-- IF YOU WANT TO
ENJOY A HIGHER INTEREST RATE THAN YOU'RE GETTING ON
YOUR CD OR IRA-- YOU NEED TO CALL NOW TO
_______________ OR _______________.
NOTE: Insert your free tape or materials in these ads, or order the Paul
Strassels interview tape from our office.
Success, Inc. All Rights Reserved
Seminars & Direct Mail
RETIRED OR
RETIRING SOON?
Free Retirement and Asset Protection Educational Luncheon
•
•
•
•
•
•
•
Learn how thousands of Americans have eliminated current income tax on their
interest earnings or Social Security earnings!
Learn how you can possibly increase your CD's, savings or IRA's interest rate
and still have your principal guaranteed!
Learn how to possibly avoid losing up to 75% of your IRA, TSA, SEP, 401K,
or other qualified plan to estate and income tax.
Learn how you can possibly exempt your assets from high state inheritance
tax (WHERE APPLICABLE) and possibly avoid the high cost and long delays of
probate.
Learn which assets could be taxed upon death.
Learn how to link your rate of return to a stock market index and still guarantee
your principal.
Learn about risk. Which investments have principal at risk and which
investments guarantee the principal.
If you have CD's, IRA's, Stocks, Bonds, Mutual Funds, Fixed, Index or Variable
Annuities, you and your heirs can't afford to miss this free luncheon!
Find out how hundreds of local residents have simplified and secured their retirement and
estates!
Please call _______ or ___________ for Reservations.
Absolutely No Cost or Obligation! No products will be sold!
Seating is limited, therefore, reservations are required!
THURSDAY, SEPT 28
(ADDRESS HERE)
This luncheon starts promptly at 11 a.m. and concludes at 1 p.m.
You are welcome to bring a guest.
Free Parking Available
DOOR
PRIZES
will be
given away!
Success, Inc. All Rights Reserved
Success, Inc. All Rights Reserved
This seminar is being offered to you as a
service of our company. There is absolutely
no cost or obligation.
• How to increase earnings.
• How to avoid probate.
• How to reduce income tax.
Topics of Discussion:
We would like you to attend our informative
30-minute seminar and have a free lunch on us.
YOU ARE INVITED TO A FREE LUNCHEON
________________________________
________________________________
Location:________________________
Time:___________________________
Date:____________________________
Your company name
address
phone number
Sponsored by
Seating is limited, so call 1-800-000-0000 to
reserve your seat. Spouses and/or interested
guests are welcome.
IF YOU HAVE
CD'S, IRA'S
OR OTHER INVESTMENTS,
YOU WON'T WANT TO MISS THIS
FREE SEMINAR!
Learn about a safe alternative
to today's low interest rates.
Learn how millions of Americans have
stopped paying current income taxes
on their interest earnings.
Learn how to avoid risk, avoid probate,
and make your money exempt from state
inheritance taxes. (where applicable)
FIND OUT WHAT A NATIONALLY RESPECTED
CONSUMER ADVOCATE SAYS IS
"THE INVESTMENT OF THE
NEW MILLENIUM"
Receive a free copy of his interview on cassette free, just for attending!
NO RESERVATION REQUIRED
LOCATION:
DATE:
TIME:
NO COST OR OBLIGATION
•
FREE COFFEE & DONUTS!
Success, Inc. All Rights Reserved
IF YOU HAVE
CD'S, IRA'S
OR OTHER INVESTMENTS,
YOU WON'T WANT TO MISS THIS
FREE SEMINAR!
Learn about a safe alternative
to today's low interest rates.
Learn how millions of Americans have
stopped paying current income taxes
on their interest earnings.
Learn how to avoid risk, avoid probate,
and make your money exempt from state
inheritance taxes. (where applicable)
FIND OUT WHAT A NATIONALLY RESPECTED
CONSUMER ADVOCATE SAYS IS
"THE INVESTMENT OF THE
NEW MILLENIUM!"
Receive a free copy of his interview on cassette free, just for attending!
NO RESERVATION REQUIRED
LOCATION:
DATE:
TIME:
NO COST OR OBLIGATION
•
FREE COFFEE & DONUTS!
Success, Inc. All Rights Reserved
Success, Inc. All Rights Reserved
NO RESERVATION REQUIRED
LOCATION:
DATE:
TIME:
P NO COST OR OBLIGATION P
FREE COFFEE & DONUTS!
Receive a free copy of his interview on cassette free, just for attending!
"THE INVESTMENT OF THE NEW MILLENIUM!"
FIND OUT WHAT A NATIONALLY RESPECTED CONSUMER ADVOCATE SAYS IS
Learn how to avoid risk, avoid probate, and make your money exempt
from state inheritance taxes. (where applicable)
Learn how millions of Americans have stopped paying current income taxes
on their interest earnings.
Learn about a safe alternative to today's low interest rates.
YOU WON'T WANT TO MISS THIS FREE SEMINAR!
OR OTHER INVESTMENTS,
CD'S, IRA'S
IF YOU HAVE
IF YOU HAVE
CD'S, IRA'S
OR OTHER INVESTMENTS,
YOU WON'T WANT TO MISS
THIS FREE SEMINAR!
Learn about a safe alternative to today's low interest rates.
Learn how millions of Americans have stopped paying
current income taxes on their interest earnings.
Learn how to avoid risk, avoid probate, and make your money
exempt from state inheritance taxes. (where applicable)
FIND OUT WHAT A NATIONALLY RESPECTED
CONSUMER ADVOCATE SAYS IS
"THE INVESTMENT OF THE
NEW MILLENIUM!"
Receive a free copy of his interview on cassette free, just for attending!
LOCATION:
DATE:
TIME:
NO RESERVATION REQUIRED
NO COST OR OBLIGATION
FREE COFFEE & DONUTS!
Success, Inc. All Rights Reserved
LEARN HOW MILLIONS
OF AMERICANS HAVE
STOPPED PAYING
CURRENT INCOME
TAXES ON THEIR
INTEREST EARNINGS.
Call for a free tape and
find out what a
nationally respected
consumer advocate
says is the investment
of the New Millenium.
Toll free 1-800-000-0000
Local calls 000-0000
NO OBLIGATION
Success, Inc. All Rights Reserved
Co
St ab nc
oc ou er
k M t ne
th d
ar e
ke
t?
Learn how to avoid risk,
avoid probate, and make your
money exempt from state
inheritance taxes. (where applicable)
Call now for your free report and find out what a nationally
respected consumer advocate says is "The Investment Of The New Millenium."
Toll free 1-800-000-0000 • Local calls 000-0000
Free with no obligation!
Social Security Being Taxed?
Learn how millions of Americans
have stopped paying current
income taxes on their
social security earnings.
Call now for a free report.
Toll free 1-800-000-0000 Local calls 000-0000
Success, Inc. All Rights Reserved
Do You Have a
CD Maturing?
How
about
0.00%*
NO FEES! NO SALES CHARGES!
GUARANTEED PRINCIPAL
& INTEREST RATE
Call now for more information!
Toll free 1-800-000-0000
Local calls 000-0000
Your company name
and address here
*Include disclosure statement about your
product supplied by your company.
Success, Inc. All Rights Reserved
Sample Letters
Mr. Joe Client
123 Any Street
Anytown, CA 95121
Dear Mr. Prospect:
Please find enclosed the information you requested. Tax-deferred annuities have proven to
be one of the safest and highest yielding guaranteed investments in the U.S. today. Americans
invest over $220 billion into tax deferred annuities each year.
If you are fed up with low interest rates on your Certificate of Deposits (CD's) or Money
Market accounts and would like to earn 1 1/2 to 2% more than you are currently earning,
then tax-deferred annuities might be for you. Annuities grow tax-deferred, so you control
when income taxes are paid. This allows your money to grow much faster.
Our goal at XYZ is to assist you in decreasing your current tax burdens and increase your
yield in the safest and most conservative manner possible.
Please review the enclosed material and listen to the "Questions & Answers on Annuities"
audio cassette by consumer advocate Paul Strassels. I would like to have the tape returned if
you have no further use for it, or please share it with a friend who may be interested in
annuities before returning it.
Thank you and I'll call you soon to follow up. In the meantime, if you should have any
questions, please call me.
Sincerely,
Agent's Name
Title
You can offer any free information.
Examples:
-videocassettes
-charts & graphs out of
MONEYtalks
-free material supplied by
insurance carrier
Enclosure
Success, Inc. All Rights Reserved
Mr. Joe Client
123 Any Street
Anytown, CA 95121
Dear Mr. Prospect:
How safe is an investment that guarantees you a loss?
If you're currently earning 4% on a CD and you're in a 28% tax bracket, then over 1% of your
return goes to pay taxes leaving you less than 3%. When you subtract from that what's eaten up
by inflation, which is currently averaging about 3.5%, you're actually losing one-half percent in
purchasing power!
In that same 28% tax bracket, you would have to earn over 10% in a bank CD to beat the 7.50%
Tax-Deferred Return on the annuities that we offer.
Annuities, simply put, are "TAX DEFERRED." You don't pay taxes until you take your money
out to spend it. This gives you the advantage of controlling when you pay income taxes. Your
principal earns interest, your interest earns interest and the money that you would have
normally paid the IRS every year in taxes stays in your account to earn interest. The power of
tax-deferral means your money can grow much faster, and because there are no sales charges,
100% of your money goes to work immediately.
Annuities can even offer more liquidity than a bank CD. Most plans allow you to access as much
as 10% of the accumulated value each year penalty-free.
Please take the time to read over the enclosed brochure. Annuities offer some of the best yields
and advantages of any investment available.
Thank you and I'll call you soon to follow up. In the meantime, if you should have any
questions, please call me.
Best regards,
Agents Name
Title
Enclosure
Success, Inc. All Rights Reserved
Ms. Jane Prospect
123 Any Street
Anytown, CA 12345
Dear Ms. Prospect:
How safe is an investment that guarantees you a loss?
Would you like to learn how millions of the smartest Americans have stopped paying
current income taxes on their interest income?
If you're currently earning 4% on a CD and you're in a 28% tax bracket, then over
1% of your return goes to pay taxes leaving you less than 3%. When you subtract
from that what's eaten up by inflation, which is currently averaging about 3 1/2%,
you're actually losing one-half percent in purchasing power!!!
Annuities can offer more liquidity than a bank CD, and are tax deferred! Most plans
allow you to access as much as 10% of the accumulated value each year penalty-free.
Call today to find out what a nationally respected consumer advocate says is THE
INVESTMENT OF THE NEW MILLENNIUM!!! You can receive a copy of his
interview on cassette free by calling me today with no cost or obligation!!
Thank you and I'll call you soon to follow up. In the meantime, if you should have
any questions, please call me.
Best regards,
Agent's name
Title
Success, Inc. All Rights Reserved
For Agent Use Only
RECOMMENDED
READING
T
o keep up to date on what your clients are learning, you
should subscribe to the same periodicals they read and tune
in to the same shows they watch. This suggestion does not
mean the publications are correct or the radio and television
shows are accurate. It simply means these are the primary
sources used by your clients and future clients as they make
their retirement, tax and financial plans.
Success, Inc. All Rights Reserved
RECOMMENDED
READING
Suggested Reading
By Paul Strassels
Kiplinger’s Personal Finance Magazine. It used to be called Changing
Times, but has since changed names. It is inexpensive and it is usually
pretty accurate in its reporting. You can subscribe at Editor’s Park, MD
20782. Or call 1-800-544-0155 or go to www.kiplinger.com.
Money Magazine. Personally, I don’t care for this one nearly as much as
Kiplinger’s, but the number of subscribers to this publication makes
it a must – just to see what everybody is reading these days. Subscribe by
sending your check to P.O. Box 61790, Tampa, FL 33661-1790.
Boardroom Reports. This publication is more business oriented, and
there are a ton of people who take this every month. Subscription Service
Center, Box 50387, Boulder, CO 60321-0387.
Women’s magazines. In this country, more wealth is controlled by women
than by men. That’s why you should at least glance at what the money
columnists are writing about in the monthly women’s magazines, i.e.,
Family Circle and Woman’s Day.
The Wall Street Journal. This is almost obligatory reading. Every
businessperson takes the Journal, whether they read it or not. In it are a
lot of articles, interest rates and ads that are hitting clients every weekday.
You may got to www.wallstreejournal.com.
Your local newspaper. You have to know what your competition is doing,
and the only way to check is to scan your local paper. The paper also
carries national stories that concern financial matters.
Success, Inc. All Rights Reserved
RECOMMENDED
READING
Suggested Reading
By Bobb Meckenstock and Bill Johnson
Following is a list of publications and books which are very helpful in
keeping you informed about your industry and the financial marketplace.
Advisor Today - www.advisortoday.com
Life Insurance Selling - www.lifeinsuranceselling.com
Financial Planning - www.financial-planning.com
Round The Table - www.mdrtpowercenter.org/dept.asp?dept_id=157
Broker World - www.brokerworldmag.com
Bests Review
Investors Daily
National Underwriter - www.nationalunderwriter.com
National Underwriter Tax Facts
Forbes - www.forbes.com
Senior Market Advisor - www.seniormarketadvisor.com
The Feldman Method, Andrew H. Thomson
Marketing to the Affluent, Tom Stanley
The Fall of First Executive, Gary Schulte
Leadership is an Art, Max Depree
My Life in Advertising, / Scientific Advertising, Claude Hopkins
Success, Inc. All Rights Reserved
Marketing Annuities:
A 'Window of Opportunity'
printed in part with permission from INVESTMENT PROFILES
Following a excerpts from an interview with Bill Johnson and Bobb Meckenstock.
..."Marketing and selling are two
completely different things. The
financial services industry and the
life insurance industry have a real
difficult time separating those two.
Most insurance agents we work with
always get the two confused,"
Johnson says...
..."The difference between making
$30,000 to $50,000 a year in the
financial services industry and making
$500,000 to $1 million a year is simply
in the amount of people you're seeing on
a day-to-day basis, and that comes
down to having a system in place that
is successfully generating a steady
stream of traffic," Johnson maintains.
Meckenstock echoes this view, saying:
"I'm trying to use a literal fish net to
bring people into my office..."
... "The big producers have learned that
you have to put a system in place,
"Johnson observes. It's working on an
ongoing basis, generating a steady
stream of traffic so you can do what
you do best, which is sell..."
...Meckenstock has himself sold more
than $100 million in annuities. "We
wanted to be the one-stop financial
center for our existing clientele first
and then bring in other prospects
based on our success," he says...
..."If I'm talking to a stockbroker and
he offers annuities cross-marketing
is going to help his stock business. If
we're talking to a life insurance
agent, I guarantee he'll sell more life
insurance if he offers the annuity
first from the balance sheet than he
ever did before on a straight life
insurance sale..."
Selling Concepts, Not Products
..."Too many people are trying to sell
their products through their marketing
pieces when they should be selling an
emotional response," Johnson says.
"They shouldn't be trying to convince
somebody to purchase a product
through any type of advertising media.
They should be trying to initiate a
response to meet with the sales
representative to learn this rewarding
concept that will help make their life
better..."
..."The biggest companies in the
country, in any industry, are applying
emotional-based, response-orientated
marketing techniques. They're making
the prospect's life better and richer
Success, Inc. All Rights Reserved
How to Close an Annuity Sale
Excerpts from interviews with William J. Johnson
“To close an annuity sale successfully, start preparing long before you sit down with a
customer and ask for a signature.”
“The close is important,” says Johnson, “but you’ll never get to the close if you don’t learn to
sell concepts instead of products.”
“Instead of focusing on the rate of return of a particular annuity, sell the client on safety,”
Johnson advises.
“Agents think the rate is more important, but the client usually think safety,” he says.
When it comes time to close, Johnson offers these two tips:
•Don’t ask the client, “What do you think?” That makes it too easy for a client to turn
you down. Instead, give the client a choice of two or three solutions - and ask them
which they think is best.
•Show the client the cost of waiting to make a decision. For instance, a prospective
client in the 28 percent tax bracket who holds a $100,000 certificate of deposit
paying 5 percent could grow his money much faster - because of the higher rate and
tax deferral if he purchased an annuity paying 6 percent.
It’s about $2,400 a year faster.
But Johnson says his most important closing technique is simply to spend time with his clients.
“Don’t rush for a quick sale,” he says, “that might get the client to convert a $10,000 CD. But
if you took more time, you would learn that he had a $100,000 CD coming due in the next few
months. If you take your time and build relationships, you’ll get all of their money to invest
instead of just a portion.”
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