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Smart advisors know that converting prospects to clients is only part of the game. The other part and one that is equally as important is keeping clients around.
As has been widely documented, there are myriad reasons why clients part ways with advisors, including poor communication, what they perceive to be deceptive fee practices, dissatisfaction with investment performance and recommendations and trust issues, just to name a few. However, considerably less ink is spilled on how advisors can retain clients.
One of those ideas is staring advisors right in their respective faces and it’s a product that likely already regularly discussing: annuities. After years of stagnation, annuity sales surged in 2022 and that trajectory continues today. That signals that the interest is there. Moreover, data confirm that clients that are interested in annuities know where to go when they have questions. They turn to advisors, underscoring the point that these products can in fact client retention tools.
Yes, Annuities Stoke Client Devotion
As advisors know, there are more big reasons why annuities are “having a moment.” The thousands of baby boomers retiring every day coupled with concerns about outliving retirement savings has thrust annuities back into the spotlight. However, it’s not just boomers that are responsible for the annuities renaissance. Gen X, which is next up to hit retirement age, is worried they won’t be able to enjoy retirement comfort on par with their parents and thus are considering annuities.
Data also confirm that many advisors are already leveraging annuities as ways to bolster client relationships, keeping more clients as, well, clients.
“According to recent survey results from Nationwide, 73% of financial professionals who sell annuities believe they help them retain clients,” notes the asset manager. “Additionally, 81% of those with higher production – those who have sold at least 10 annuities in the last 24 months – feel they make their client relationships.”
As Rona Guymon, senior vice president of Nationwide Annuity Distribution, points out, annuities aren’t an area in which many clients are conversant. They know the term and maybe a bit about the guaranteed income stream, but they’re not knowledgeable in annuity mechanics. So they have interest, but also plenty of questions and that can be a recipe for client retention.
“This presents an opportunity for financial professionals to connect with their clients on a deeper level, driving conversations to understand their long-term goals as they work together to build a holistic plan,” says Guymon. “These interactions can set the stage for a more meaningful and trusting relationship – one that even has the potential to expand to the next generation as advisors work with annuity owners’ heirs.”
Advisors Face Annuities Challenges
Broadly speaking, the aforementioned resurgence in annuities interest is a positive for the advisory industry, but it’s not without challenges. As Nationwide observes, all those annuities commercials clients absorb on TV or radio are overwhelming to 60% of viewers and more than half come away with a lower opinion of the products. Overall, 78% of clients polled told Nationwide they view annuities in a negative light.
Those data points don’t imply that advisors need to be on missions of conversions when it comes to annuities or employ hard sell tactics, but they had better be equipped with the data and illustrations that outline the benefits of annuities.
“In order to effectively sell annuities, break down misconceptions and build trusting relationships with their clients, financial professionals say they are turning to annuity carriers for help – specifically when it comes to materials they can use to educate their clients,” concludes Nationwide. “Fifty-four percent said they are seeking client-facing materials on annuities as a source of guaranteed income, and 43% said they want more on annuities’ role in an overall financial plan.”