By W. Andrew Unkefer
AnnuityNews
This message is specifically written for licensed insurance agents who want to maximize their sales performance in the fixed insurance business. If you are also licensed as an investment advisor or stock broker, please keep reading but understand that you are going to learn, right now, what makes the sale of fixed annuities, indexed annuities and universal life insurance sales happen and you may not like what you read.
One of the most important things you can do as an individual insurance professional is to stay focused on the ideas, strategies, concepts and techniques that make fixed insurance products unique compared to every other financial services product.
Consider sameness as the great curse. Positioning your most unique attributes puts you in contrast to the masses of financial advisors pushing mutual funds, hedge funds, stocks, bonds, CDs, options or even commodities like gold along with any “new” investment under the sun. To make a difference you have to actually be different. Offering everything that everyone else does merely makes you average. Being unique allows you to stand out (or said another way, to be outstanding) from the hordes of advisors who are trying to match or exceed some pre-determined benchmark such as the S&P 500. Chasing benchmarks can be a real disappointment. I’ll come back to that thought, but let’s keep moving.
Think about this purely from a sales perspective just for a moment. Let's say that you have two directions you could go as a sales professional. Assuming a great value proposition is available either way, as a sales professional would you rather visit with people about a set of products that millions of other sales people are already offering to the public or would you rather represent a product that the consumer has rarely explored? Again, both directions have a great story but which one is a better business opportunity for you? Which direction would improve your potential?
If you find yourself leaning toward offering the same financial products and offerings as the large wirehouses, stockbrokers, investment advisors, hedge fund managers, mutual funds and the like, then you might want to stop reading now.
Choose to be outstanding in the financial services universe. Choose to be unique. Identify the characteristics that make it so.
I think you are getting the idea.
The problem with benchmarks…
Benchmark: “A basis for comparison; a reference point against which other things can be evaluated.” So what's the problem? When everyone uses the same benchmark, everyone tends to get the same results. More concerning is that everyone tends to make the same mistakes. If everyone is making the same decisions and getting the same results, you will naturally have more volatility. When things go up, everyone will flood into that space. When things go down everyone will vacate that space. This increases the rate of volatility.
Just ask Norbert Mindel, JD, CPA, PFS, CFP. Norbert is the co-founder of Forum Financial Management, LLC., and has experience managing $3.3 billion in client funds along with authoring a recently published book, Wealth Management in the New Economy. In the March 22, 2010 edition of InvestmentNews magazine, Mindel revealed some astonishing thoughts.
Over the long haul, Mr. Mindel claims, “It is impossible to outperform the market. … The best any investors can hope to achieve over time is the market rate of return. If you use active managers, the best you can hope to achieve is the market rate of return minus the fees you pay those managers.”
He goes on to say, “(This) was not news to the academic world, where a large number of studies have shown that it is pretty much impossible to beat the market on a consistent basis.”
So is there any evidence? Plenty!
“Consider: From 1994 through 2008, the average large-cap mutual fund that was in existence for the full 15-year period (some 400 funds) posted an annualized return of 5.61 percent compared with 6.64 percent for the S&P 500. … These funds ... pay their managers millions of dollars in fees and yet they fail to provide you, the investor, with a consistent market return.”
I had spoken with high-net-worth fund managers on this topic. They explained their goal was to use their investment research and trading to outperform the benchmark (in this case the S&P 500). That sounded pretty good. Then I realized that this is what every investment manager is telling everyone else. Now think about that. Is it possible for EVERY investment manager to exceed the performance of the market? Just the opposite, it is not possible. The goal they have set is not at all achievable. That is like telling 100 percent of the people you meet that they going to do better than average. It is just not true.
Perhaps they should have said, “The best we can achieve is to match the performance of the benchmark minus our fees.” Now that would have been a short meeting.
So, as a fixed insurance professional, stay unique and return to what is best about our industry.
Tax Deferral
We have just witnessed the single largest expansion of U.S. government spending in history and it looks like the politicians are not done yet. It is completely reasonable for taxpayers to look for ways to legally shelter their earnings from taxation until they choose to use their funds.
Protecting Social Security Benefits
Many people know that they are paying taxes on their Social Security benefits, but they don’t know how to avoid it. The inside buildup within a tax-deferred annuity or life insurance is not counted toward the threshold income calculation and may allow the tax payer to keep more of their Social Security benefits.
Protection of Principal and Past Interest
Many people understand the value of saving, but not the risk of investing. Markets rise and fall on a daily basis and investors assume the risk of loss. This could not be clearer than it has been over the past decade when millions of Americans lost trillions of dollars they worked hard to accumulate.
Fixed annuities and indexed annuities may be a great alternative.
Avoiding Probate
The disposition of an annuity of life insurance is done in a highly confidential and protected manner when compared to other assets. A properly designated beneficiary allows this to happen without the costs and delays associated with probate proceedings.
Income Planning and Guarantees
Annuities have always been in a league of their own when it comes to income. New lifetime income benefit riders allow agents to position themselves as income planning experts with tools that no other advisors can offer.
W. Andrew Unkefer is the president and CEO of Unkefer & Associates, Inc., a national annuity and life insurance marketing firm. The company’s goal is to be the No.1 resource for independent agents in their life and annuity business. He may be reached at 800-523-5851 or andy@unkefermail.com.
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