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Who Are Your Warm Annuity Prospects?

In today’s busy world, it is important that advisors and their firms make the right initial connection and engagement with potential annuity buyers. A poor engagement with an annuity prospect means lost opportunity in sales for the advisor as well as the manufacturer.

A recent LIMRA Secure Retirement Institute study found four in 10 current non-buyers may buy an annuity in future. This indicates a vast demand and market for annuities. The study is based on a LIMRA SRI survey of 821 clients who had a conversation with their advisors in the last three years about a deferred annuity conversation, but decided not to buy one.

The LIMRA SRI study narrows down the deferred annuity non-buyers into three distinct categories or mindsets:

WARM: MAY BUY ANNUITY SOMEDAY, 42% of non-buyers


COLD: WOULD NOT BUY ANNUITY, 18% of non-buyers

The non-buyers in the first group, Warm, are open about buying deferred annuities in the future. They are the biggest group of non-buyers and are likely to say, “It’s not the right time” as the top reason for not buying an annuity.

The non-buyers in our second group, Tepid, show little enthusiasm about a deferred annuity and are ambivalent about its value. Their most common reason for not buying an annuity is often “other investments were a better fit.”

Members of the smallest group of non-buyers, Cold, express hostility against annuities. “I do not like annuities” is their overwhelming reason for not buying, and it’s likely that members of this group will never buy an annuity.

Advisors who can identify these warm prospects from others stand the best chance of turning these prospects into annuity buyers. Here are three ways advisors can separate these kinds of prospects from each other.

1. Ask about goals and preferences in retirement. In a recent study, LIMRA SRI asked the non-buyers to distribute 100 points across six different preferences about income in retirement based on how they valued that method (see table below). These segments differ in crucial ways when it comes to creating income in their retirement.

What the results determined was that the warm prospects value the guaranteed income the most. To cold prospects, keeping control over their investments is more important than creating guaranteed income. They also want income in retirement to have the potential to grow and are more concerned about outliving their savings in retirement years than other segments. The tepid prospects have similar retirement income preferences to those of the cold prospects.

Advisors can use simple and quick retirement profile questionnaires, similar to what LIMRA SRI designed, to identify and recognize prospects’ retirement goals and preferences.

2. Educate them first. Only around half of those who discussed annuities with their advisors are well aware of the annuity’s features. Many cold and warm prospects think advisors were not explaining annuities in terms they could understand. For many financial products, particularly annuities, there is an educational component and a steep learning curve involved.

The annuity manufacturers bear the heavy burden in helping advisors tell a simple story about annuities. Many non-buying prospects said they wished advisors could do a better job in explaining how an annuity fits their needs.

3. Build trust. Lack of trust and satisfaction with their advisors stands out among the annuity non-buyers. Annuity non-buyers show much lower levels of trust and satisfaction regarding their advisors than the actual buyers do. Warm prospects came closer to actual buyers in terms of their satisfaction with advisors. These non-buyers are more likely to believe their advisors are knowledgeable and would recommend products in their clients’ best interest. 

Most annuity discussions happen as part of broader discussions with advisors. It takes time to explain how annuities fit into a portfolio. Advisors can be more successful if they present annuities as part of retirement planning or income discussions.

Jafor Iqbal is associate managing director, retirement research, for LIMRA Secure Retirement Institute. In this role, he is responsible for managing retirement income research projects. Jafor may be contacted at [email protected] .

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