In order to sell annuities, you should identify on-profile prospects who have 1) longer-term wealth accumulation or retirement planning needs, or immediate income needs, and 2) sources of funds to meet those needs. Using the latter criterion, we will identify and discuss two broad annuity markets defined by the source of funds: non-qualified and qualified.
Before we begin, let's discuss the "longer-term" aspect of deferred annuities. As we have emphasized, deferred annuities are designed to meet longer-term needs. The definition of "longer-term," however, is relative to the prospect's age. For a prospect age 55, longer-term may mean 5 to 10 years. For a prospect age 40, longer-term may refer to needs that will not arise for 20 or 25 years. In either event, a prospect with $5,000 in a CD earmarked for next year's vacation is not an annuity prospect, unless other sources of funds are available. Keep this distinction in mind as you learn about the non-qualified annuity market.
The Non-Qualified Annuity Market
The non-qualified annuity market consists of men and women who will purchase annuities with after-tax dollars to meet longer-term wealth accumulation or retirement planning needs, with the emphasis on longer-term. As we discussed previously, deferred annuities may not be appropriate for shorter-term wealth accumulation purposes — generally those that will occur prior to age 59 ½. In addition, immediate annuities are designed to provide long-term income — income guaranteed for life.
The Single Premium Deferred Annuity Market
To identify individuals for SPDAs, begin by identifying prospects who have a minimum of $2,000 that they want to invest for longer-term purposes. SPDAs lend themselves to prospects who want:
Fixed Annuities:
Variable Annuities:
These may be people who currently have maturing CDs and money market accounts they are holding for longer-term needs. Or they may be people with mutual funds who are interested in the advantages of a variable annuity, with which they can continue to direct the investment of their dollars. On the other hand, they may be people with mutual funds who are disappointed with their investment results and are now interested in the guarantees of a fixed annuity.
You might also identify SPDA prospects among those dissatisfied with the results of deferred annuities they currently own. Using a "1035 exchange," it is possible to exchange one annuity contract for another annuity contract without incurring any current tax liabilities. In order to accomplish this tax-free exchange, the annuity owner must avoid "constructive receipt" of the proceeds of the existing annuity. The IRS has ruled that the way to accomplish this is to have the funds transferred directly between the two insurance companies. Since there are pitfalls in 1035 exchanges, you might want to see your General Agent or contact the FASTeam (1-877-ONL-AGNT, Option 3) for guidance if you identify a 1035 exchange prospect.
Others who may benefit from an SPDA are people who receive annual bonuses. Many people allocate at least a portion of such bonuses to longer-term wealth accumulation or retirement planning needs.
In general, most candidates for SPDAs are people age 50 and up, since members of this age group have had more opportunity to accumulate large sums of money ("core dollars"), and are particularly interested in retirement planning. Others might be individuals over 55 who elect to exclude the gain from the sale of their principal residence. These people commonly have large sums of money to invest for retirement purposes.
Ohio National is not affiliated with, nor does it endorse or sponsor, any particular prospecting, marketing or selling system.