“Annuities are Complicated”
One of the most common questions I get is “how do you explain an annuity to a client that knows nothing about annuities”. There’s a book that I wrote called Stress and Rocking Chairs, The 2 Common Killers of People Over 60. The whole purpose of this book was to explain in clear English, not financial jargon, how to help clients understand how annuities work, because one of the common things we hear all the time is that annuities are complicated, they’re so hard to understand. Well, let me overcome that objection first.
Client: “Annuities are so complicated. They’re so hard to understand.”
“Okay, have you ever had a mutual fund?”
Client: “Well, yes, I have.”
“Have you ever read the 50 to 400-page prospectus that goes along with that individual mutual fund?”
Client: “No, I didn’t even know that. I’ve never even known about a prospectus.” or they say, “Well, yeah, I get those about every year, every quarter, I get prospectuses…”
“Do you ever read them?”
“Even if you got through the first two or three pages of that prospectus, you would be so overwhelmed with information that you’d inevitably be confused. Obviously, there are some clients out there that take the time to methodically navigate and understand their prospectuses, but for the most part, it confuses people. Now if you have 15 to 20 different mutual funds in your portfolio, you have 15 to 20 prospectuses; which is just crazy because there’s nobody that’s going to read those, there’s nobody that’s going to understand those completely…
I know agents that have been doing this for years that don’t understand how to read prospectuses. There are even people in the variable world that don’t understand prospectuses. So how could we say that annuities are complicated when the client has had to deal with things like a prospectus? Annuities are not complicated.
The variable world is far more complex than the safe money world, in any product they offer, even stocks. Say you have a stock worth $100 and it goes up to $120. You multiply that by the number of stocks you have minus your fees, that’s what the value of your stock is, but have you ever read the financials of the companies? the PE ratios? all the variables that go into a stock? It’s unreal. So when we talk about complicated products, the fixed and fixed indexed annuities are some of the most simplistic products out there.”
If you have a client claiming that annuities are complicated, find out what other products they’ve had before and show them how those products are actually MORE complicated than the safe money product you’re showing them.