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10 steps to sell more variable annuities

how to sell variable annuities

If you're a growth-minded advisor who puts stock in surveys, now might be the ideal time to make a concerted push to build your variable annuity book of business. Opportunity is indeed knocking for advisors in the VA marketplace, according to a recent survey of executives from insurance companies, VA asset management firms and broker/dealers.

On a scale of 1 to 5, the growth prospects for variable annuities rate a robust 4.1, according to the survey, which was conducted by the Insured Retirement Institute (IRI) and Cerulli Associates. However, judging by recent sales trends, VAs are far from a sure thing. In fact, sales of variable annuities dropped 18 percent in 2009, according to the insurance industry research organization LIMRA International. That downward trend continued in the first quarter of this year, when IRI saw VA sales dip another 1.5 percent from the previous quarter.

So while the VA industry sees promising days ahead for its products, success in the current challenging sales environment demands that advisors do more than just go through the motions. Here's what top variable annuity producers are doing today to stay a step ahead of the competition:

1. Be more than a one-trick pony.

There's no such thing as a one-size-fits-all variable annuity, so for the sake of suitability. it's wise to offer products from multiple carriers. "Some products are good at some things, some are good at others," says Kevin Loffredi, senior vice president at Advanced Sales & Marketing Corp. an Oakbrook Terrace, Ill. firm that provides annuity research data and wholesaler productivity tools. "You want to be able to match client situations with the right products."

An ability to present products from multiple carriers gives advisors "a competitive advantage," says Ryan P. Klose, an investment and annuity specialist for Mass Mutual in Scottsdale, Ariz. "You're able to hit many more markets in terms of age groups." Offering VAs from a range

of three to five insurers makes sense, according to Loffredi and colleague John McCarthy. But any more than that could be too much to try to stay on top of.

Among all the factors broker-dealers weigh in selecting VA providers, insurer financial strength (credit rating) ranks highest, according to the Cerulli/IRI survey; likewise, 80 percent of advisors who responded indicated they value financial insurer ratings highest when evaluating VA products to offer clients. Given the beating insurance companies took during the financial meltdown, clients more than ever are seeking assurance that their base annuity contract and any attached guarantees are solid and safe, says Klose. To ease those concerns, he suggests advisors offer VAs from insurers with high credit ratings (A or higher) and high Comdex scores (reflecting a composite of ratings from various agencies). And he suggests they explain to clients exactly what credit ratings and Comdex scores are and why they're significant.

4. Bring living benefits into the discussion early.

The strongest-selling VAs these days are contracts with robust living benefit guarantees, according to Frank O'Connor, director of insurance solutions at Morningstar, Inc. "Products offering lifetime guaranteed withdrawal benefits with value enhancers such as step-ups and bonus credits represented the lion's share of [VA] sales. This is a reflection of the VA investor's desire for higher returns in a low rate environment, coupled with a willingness to exchange a percentage of those potential returns for the protection offered by these benefits."

Amid high equity-market volatility, the combination of income guarantees and downside protection resonates loudly with clients, says Loffredi. "They feel there's a layer of protection there, so they can go out and be a little more aggressive with their assets."

Attributes such as a guaranteed lifetime income stream, principal protection, a guaranteed death benefit and tax deferral make the annuity value proposition especially compelling. Be sure to highlight them early in the sales process.

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