One expert in the industry called annuities complex financial instruments that are not easily understood by the media or the general public.
Therefore,” he concluded, “convincing a prospect to buy an annuity can be a difficult, even arduous, process.” That statement reflects a consensus among so many who want to offer investors the benefits of annuities, but find them a tough sell.
There may not be a single other investment vehicle that requires more marketing finesse.
According to the Securities and Exchange Commission, “An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals, under which you make a lump-sum payment or series of payments.
In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date.”
There are three kinds of annuities:
• Fixed: Fixed annuities pay no less than a predetermined amount.
• Indexed: Indexed annuities pay returns based on the movement of indices, such as the Dow Jones Industrial Average.
• Variable: Variable annuities offer a range of investments for buyers to place their purchase payments, usually mutual funds.
As the following article shows, while not recognized as a separate category by the SEC, a “lifetime annuity” can be transferred to the spouse of an investor after the investor’s death.
Marketing annuities can be tough, but it is crucial for these complicated, yet potentially lucrative insurance products.
Experts advise that – above all else – salespeople should know their product cold so they can answer any questions, of which there are sure to be many. Stress the safety, security and control provided by annuities, especially to older investors.
Also, stress that there are several easy ways out if something better comes along or if they just want to change course.
Many investors avoid annuities because they are baffled by how they function or because they are tied to the insurance industry.
It is up to the person selling annuities to explain the facts to potential investors in clear, human language.
Annuities are safe, stable, lucrative and long term. They can sell themselves – with a little help.
About the Author: Andrew Lisa is a freelance personal finance writer. He covers investing and the stock market.