- Hi, if you're an agent,
and you're doing some business in the annuity space,
you've probably had a case
where the compliance department at the carrier
has burned you, from a suitability standpoint.
Hi, I'm Randy Pierson,
Vice President of Life & Annuities at Gordon Marketing,
and today I've got with me Tim Luby,
our Top Shelf Annuity RVP,
and we're gonna talk about navigating annuity suitability.
Stay tuned.
(upbeat music)
All right Tim, you know,
the bane of probably almost every annuity producer out there
is to potentially get burned,
from a suitability standpoint.
So, when we talk about navigating annuity suitability,
what are we talking about in general?
- Right.
Well, this is like underwriting is for life insurance,
for the annuity business,
and it's relatively new,
which is partly why a lot of annuity agents
get tripped up by it.
A decade ago, suitability was hardly even talked about.
Today, it's pretty significant,
and it really comes down to the carrier's desire, or need
to make sure that any purchase,
by a client, of their product,
is appropriate for them,
is in their best suit. - [Randy] Suitable, right?
- Is suitable, that's right.
- So what would you say off the top of your head
is the number one pitfall,
the number one issue that trips up annuity cases,
from a suitability standpoint?
- Probably the biggest thing
we run into problems with is replacements.
- Okay.
- Now depending on how old the product is,
if there's any surrender charges in that.
If there's a number one, that's probably the biggest thing
that people can get tripped up on.
- So in your world, right,
you spend most of your day,
most of your days,
working with advisors and agents on their annuity cases.
How many cases are you working on,
from a percentage standpoint,
that are replacement?
- It's a lot, my guess is it's north of a third,
I would say, you know, there's a lot of money in annuities,
it's been in there for a long time
and it tends to get repositioned
on a, somewhat, regular basis.
- All right.
So if we're talking about replacing an annuity,
and that's one of the biggest pitfalls,
what are some of the rules of the road, right?
Some of the basic rules that an advisor should know,
as it relates to replacements, in navigating suitability.
- Right.
Probably the biggest thing that you'd have to manage too
is the surrender charges.
It's how, you know,
if a product, you know, was sold
and it's only two or three years old,
most carriers aren't even gonna consider it.
If it's more than three years old,
the surrender charge would probably need to be reasonable
you know, it'd need to be pretty low.
"Low, what do you mean by low?"
For some carriers that's 3%,
a net surrender charge at 3% or less.
Some will go to five, not many people
that are gonna wanna take much more
than a 5% surrender charge anymore.
The other thing that they look at,
as it relates to replacements
is the history and the agent's history with,
and working with that client in terms of
if they sold them the annuity
and it was just four years ago
they may not be comfortable helping them
with a replacement of that annuity now
just four years later.
- That makes a lot of sense.
So, you know, I remember back in the day,
I don't hear about it much anymore,
but that there were allowances made
in replacements on annuities,
if there was a big bonus involved.
I mean, how does that work in today's environment?
- Well, a couple of things.
One is bonuses aren't as prevalent as they used to be.
- True that.
- I used to be on the annuity market.
Bonuses were all the rage
and all over the place for accumulation
and that kind of stuff.
We still see bonuses today
more often on like the income writers
on the benefits that aren't like
"put it in your pocket and walk away with it",
not on the account value.
But, uh, so,
and then the other thing is that some carriers
even if they offer bonuses
aren't going to consider the bonus as a way to offset.
It still has to make sense
for what they're getting out of
and, you know, along the lines with that
is sometimes you'll see surrender charges reduced
by something like a positive market value adjustment.
Some carriers will allow for that and consider it,
others won't that the surrender charge number
is a higher net number than they want.
So, and obviously, you keep saying,
you hear me saying some carriers,
it varies a lot by carrier.
- Yeah, I hear what you're saying.
So we chat a little bit about nuances
with regards to replacements
outside of a replacement scenario.
What would you say the next biggest suitability hiccup
falls within?
- Interestingly, it's probably the percentage
of someone's assets, or liquid assets in particular,
but percentage of someone's assets
that are already in annuities and life insurance.
- Yeah, that's what I was thinking.
- Yeah, that tends to trip people up
and it's funny because you'll have clients
that just really like annuities,
they love annuities, they love life insurance
and I love annuities.
I'm a huge fan of annuities.
I think they're appropriate for everybody
but they're not appropriate for all of everybody's money.
- Yeah.
- And so that's what it comes down to,
when the carrier sees someone
getting too high percentage of their assets in annuities,
they get uncomfortable continuing to increase that number.
- So is there a rule of thumb?
I mean, is there a guidepost
that an agent should try to stay within?
- Safest number probably 50%,
but 50% of someone's assets in annuities,
we'll have some carriers
that will get higher than that number
based on some extenuating circumstances.
- And I would assume that's probably typically age,
or something?
- It might be age,
it might be whether we were actually
increasing their percentage,
or just continuing.
In other words, if they've already got,
you know, 60% of their money in annuities,
but 30% of it's in qualified plans
and the surrender charge is gone,
we're not increasing it to 70, we're staying at 60
but they might take it
because it would almost be remiss
for them to stay where they are, you know,
maybe the interest rates where they are.
So there are some extenuating circumstances
that some carriers, not all,
will look at and consider.
- We're rapidly running out of time here,
but let me ask you, so do we have,
an advisor might be watching this video and thinking
"Is there anything you could put in my hands
to help me with suitability?"
Do we have a guidebook
or tips sheet on how to navigate suitability?
Do we have anything we can put
in the agent's hand to help them?
- We do have some generic guide for you.
Some can carriers will give you the answers to the test.
Other carriers are funny about that.
They don't want to give you
the answers to the test in advance
because they feel, I don't know,
maybe they feel like that's how you can manipulate things,
to some degree.
So it really varies an awful lot,
and the challenge that we have
is we can use our significant experience
as a team to try to assess
whether something will be deemed suitable
by a different carrier or not,
but even sometimes we'll get surprised, you know
one may think, "Okay, it looks all right, this is okay,"
but it'll get to the carrier
and they'll see something that deems it unsuitable for them,
and there's nothing worse than an advisor
that's gone out and taken an app
and has to go back to a client
and say, "Yep, can't do it."
- So the biggest tip then is
if you suspect that suitability
may be an issue in your annuity sale,
or even if you don't suspect suitability
will be an issue in your annuity sale,
but you want to be safe rather than sorry,
the tip is to call us, right?
To reach out to Tim,
and how might an agent reach out to you?
- Well, they can email me at timl@gordonmarketing.com
They can call me at extension two one three, or two thirteen
at the toll free number at Gordon Marketing
and basically we'll provide some guidance.
You know, if we don't know the answers,
have a real good feel for the answer,
we can call the carrier.
They're not always gonna tell us
emphatically yes or emphatically no,
but we can get some terrific guidance.
- Yeah, absolutely.
Well, listen, our time has run out for this video,
but before we go, I'd like to make a couple comments.
First and foremost, please do me a favor
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and also, I wanna make sure I remind everybody
about our podcast.
We started recording a podcast a few months ago.
It's been exceedingly well received by our agents.
We dive a little bit deeper, spend a little bit more time
30, 35 minutes or so on a particular subject
that I'm sure you will listen and find useful
in helping you sell more in life and annuities.
To learn more about our podcast or to find it
click down into the description
and you'll see the links,
and you can find us there,
but for now on behalf of Tim Luby and myself, happy selling.
(upbeat music)