Paul Reacts: How To Sell An Annuity In 10 Minutes How To Sell an Annuity in 10 Minutes

Paul Winkler: Welcome to “The Investor Coaching Show.” I am Paul Winkler. We got a dog in the studio. Doesn’t get any more real than that, does it?

Evan Barnard: No, uh-uh. They get to hear my sweet dog voice.

PW: Yeah, it’s nice.

EB: Turn in my man card.

PW: Yeah, I know. That’s one thing that’ll do it, won’t it? You lose your card, baby.

Oh man, how fun is that? How fun is that? Yeah.

Oh, Evan, we have not even had a chance to talk at all before the show. And I have some stuff today I think you’re going to find fun too, because I’m sure you brought things. Maybe, maybe not.

EB: I’ve got a few good ones. I got a couple of nuggets.

PW: Do you?

EB: If things slow down, I can pull the pin out of the grenade and have some fun.

PW: Oh yeah, I know how you are about that. I know how you are with that.

How To Sell an Annuity

PW: Okay, so I’m going, “Where do I even want to start?” Okay, so I will start at the beginning. No. “In the beginning …”

No. I was watching a video last night, and I thought, I need to make some radio segments out of this. Now, there are several articles that were out there that are really, really worth talking about as well, and I think that we want to cover some of those as well.

But there was this presentation, and I guess I am on one of those feeds on YouTube where you’re just getting, “This is what you’re going to be interested in watching, we think.” And lo and behold, I was very interested in it.

EB: I’m sure.

PW: It was, “How To Sell an Annuity in 10 Minutes,” was the name of the presentation.

EB: Oh, wow. Okay.

PW: I thought, Okay, now I’m going to see how they sell this. So I pulled this open, and I pulled out just a couple of choice things, and this is how it opens.

This agent, he’s talking to this guy who is a big producer for the insurance company and saying, “You are the bomb, man.” He’s just blowing smoke up his butt the whole time. He’s just blowing smoke.

And he’s like, “Wow, that was a really nice introduction.” He goes, “Well, I just say things about people that I want said about me someday.” That was his point.

EB: Fair enough.

PW: That was the point. I was like, Okay. Yeah, yeah, fair enough. Okay.

So he opens up the presentation with this. I think it’ll play. Yeah.

Frank Eufemia: That was the entire presentation. This slideshow right here sold me more annuities than you can even imagine. I think I have 50-plus annuity clients, and I didn’t really sell them the entire time, which I should have.

But it’s not a tough, tough program. It’s pretty simple.

PW: So he is just saying it’s really super easy to sell this stuff to people. Now, he gives a stat in the very, very beginning. He’s talking about how much of the money coming into the insurance company — or how many of the sales were annuity sales versus life insurance sales.

EB: Oh, gosh.

PW: And to his chagrin, he was concerned that they weren’t selling enough annuities, was what this guy was saying.

EB: Okay.

PW: And I thought, well, I remember, and I can just tell my story because you and I actually have a bit of a background in the insurance side as well.

EB: We’ve seen the underbelly.

PW: Yeah, exactly. But that’s where I started. I started in the insurance side of things. And the reason that we sold more life insurance was that you were dealing with a commissionable premium of, the first year, you might be getting 50% to 100% of the premium that was paid.

EB: Right. Right. On permanent.

PW: Yeah. On permanent insurance.

So if you were selling a life insurance policy, you could make a ton of money. Versus an annuity, it was good. I mean, 10% commission on the deposit was good and everything like that.

But typically, people didn’t necessarily push that because the commissions, they weren’t necessarily sure that they’d be high enough.

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But nowadays, the products are so easy to sell because of how they’re marketed in a misleading manner. 

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This guy, number one, that’s how he starts it off, and he’s talking about how easy it is to sell.

Annuities and the Stock Market

PW: He shows a graphic, and Evan, I’m going to show you the graphic. The audience would love to be able to see this, but you won’t be able to see this. You can’t see my phone.

EB: I’ll do shadow puppets while they’re listening.

PW: Yeah, yeah, help them out a little bit. This is the graphic he showed as being what he used to sell the product. Okay?

EB: Okay. Got it.

PW: Basically, for those of you that can’t see what I’m holding in front of me, the stock market goes up, and they’ve got this blue line, and it goes up. It says, “Well, you get that. Stock market goes up, you get that.”

Then the market goes down. He has this dashed red line going down from there. The stock market goes down.

And then he has this line going over from left to right, straight across. You don’t go down with the stock market is basically what he’s pointing out with this particular graphic.

Then the market goes up and you get that, when the market goes up. And then when the market goes down, dashed line going down, you go straight across. And then when the market goes up, you go up. And then when the market goes down, dashed line going down, you go straight across.

Basically, you have that. I’ll play how he describes that in just a second, because I think it’s interesting how he describes how it works.

And he said, “This presentation sold me all of this insurance.” And I’m going, “Yeah, it’s easy because it’s really super misleading.” Really misleading. You’re saying that the market goes up, you go up.

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No, there are a lot of limitations on how much you go up if it does go up. 

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You have limitations on participation, you have limitations on maybe cap rates, those types of things. But it’s just incredibly misleading, what you guys are doing right there.

Misleading Clients

PW: Speaking of how it’s misleading right here, well, how does he get away with it? Well, I think he describes how he gets away with it really well in the next little clip right here. This is how he learned how to do this.

FE: I’m going to start with just a simple presentation. If you guys went to any of the training camps or the conferences, the fall sales or the spring sales conferences, you would’ve saw this.

But it’s a 10-minute presentation, and for me, simple is easy. I loved Rougier. I thought he was a great trainer. He was a genius, in my mind.

PW: Okay, so this trainer is a genius, in his mind. So I think we have to redefine genius right here, but I digress.

FE: But when he spoke, the way he spoke, the language he used, I’m going, “I can’t say that. People are going to look at me and go, ‘You got an earpiece thing. Somebody’s telling you what to say, because you’re not that smart.’”

PW: You’re going to hand your entire life fortune over to a financial advisor that, quote, unquote, “is not that smart”?

EB: That needs an earpiece to explain what he’s presenting. That’s good.

PW: Okay.

EB: God bless him for his honesty.

PW: Yeah, yeah.

EB: I mean, really.

PW: But then, again, he doesn’t think a client will ever hear this. This is his sales presentation.

EB: That’s true.

PW: This is his sales training.

EB: They shouldn’t have put it on Facebook if they didn’t want clients to hear that.

PW: Yeah, yeah. It’s YouTube. YouTube.

EB: Whatever.

PW: But yeah, you’re right, they probably shouldn’t have put this whole thing on there, because you know that Paul’s going to get a hold of it. But that’s what he thinks of himself.

EB: Yeah.

PW: But here’s the question: What does he think about the clients that he’s selling this to?

EB: Uh-oh.

FE: And our clientele is not that way either, at least my market.

PW: So they’re not very smart either, is basically what he’s saying right there.

EB: Wow.

PW: Yeah. Yeah. Yeah. You can’t make this stuff up.

EB: Man.

PW: So what does he say in the midst of the presentation to get all of these people to sign up for this index annuity? Well, first what he wants to do is, he wants to describe what an annuity is.

Now, does he get into the details on exactly how they work and what’s going on underneath the surface and what’s the difference between a variable and fixed annuity? No.

EB: Well, no, because his clients aren’t that smart.

PW: No, his clients aren’t that smart. That’s right. We can’t confuse them.

EB: Don’t confuse them.

PW: Yeah, that’s right. This is what he says.

FE: Here’s a simple 101 on what annuities are. There are three different types of annuities. We have variable annuities, we have fixed annuities, and then we have indexed annuities.

FFL sells indexed annuities. Pretty simple, right?

PW: That’s all he’s going to talk about here.

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Now, when we talk about annuities around here, number one, we don’t sell them, we don’t receive commission. 

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It’s not that I hate them or that they never have any use whatsoever. We’ll talk a little bit about where they might have use, but where they could be very, very problematic during the course of the show.

Using an Annuity

PW: I want to give you an example I think will blow you away, looking at two 25-year periods in history, and what if you actually used an annuity for what it was designed to do? I’m going to actually walk through that at some point here today.

But here’s the thing he’s saying: He’s got these different types of annuities and variable annuities. And in certain circumstances, I’ve actually had to use them. Because you might have an annuity that somebody buys, they’ve held it for many years, and they’ve got a gain in it, albeit probably not as much as they should have gained, but they might have a gain.

And then if you pull that out, you pay taxes on it because annuities are last in, first out, which is very problematic. Meaning that you have to pay taxes on all the gains first when you’re pulling money out.

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So if you’re living off of this thing, you don’t even get back to the basis, which is tax-free, until you burn through all the gains. 

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And that’s the problem that you run into, and they can be very problematic as something that you inherit. Very, very problematic, as far as tax treatment, when you inherit an annuity.

Now, variable annuities: Sometimes what happens is you say, “Well, gosh, I’ve got this old annuity and I want to make sure that I do have something that has more of a diversified look to it as far as the types of things that I can invest in.” So you’ll do what’s called a 1035 exchange.

Let’s say you have $100,000 that you put into something, it grows to $150,000, and then you move it over. Well, you don’t pay taxes on the $50,000. If you do a 1035 exchange, you don’t pay taxes on it until later on when you start to pull that money out.

But what ends up happening is you get that movement of the $150,000 over tax-free to the new annuity, and now we can diversify it more with the variable annuity. But he said, “We don’t even deal with that type of stuff.” That’d be the only one that I’d be going, “Oh, that might be actually fairly useful.”

EB: And only non-qualified, at that.

PW: Yeah, exactly, on non-qualified annuities. Right. If you’re using an annuity in a qualified, like an IRA …

EB: You’re already in trouble.

PW: Yeah. Yeah. The FINRA, Financial Industry Regulatory Authority, warns people not to do that actually. They have a whole thing, “Beyond the Hard Sell,” was what it was called, and they were warning people.

And you go, “Why don’t they just tell people you can’t do it?” Well, it’s a free country. They’ll let you do just about anything you want in the financial services industry, and it’s not illegal.

It’s immoral, but it’s not illegal, in my humble opinion. I’ll add that. Yes, go ahead.

EB: I’ll put my toe in the water.

PW: Go ahead.

EB: Indexed annuities are the new Jimmy Kimmel financial product.

PW: You went down there.

EB: It’s not illegal. Probably shouldn’t be doing it, but …

PW: Yeah. Yeah.

EB: There you go.

PW: That’s a whole other topic. That’s so funny.

The Truth About Indexed Annuities

PW: Okay, so he describes the three different types right there, but what they sell is the indexed annuity. And how are we going to describe that to the buying public?

FE: I have to figure out how to make this slideshow go, so bear with me.

EB: Got to figure that out.

FE: How does an indexed annuity work? And this is the presentation, Grady, I would use in a home. I would draw it on the back of a lead sheet, but I would draw a line up just like this blue line. I’d go, “Listen, Grady, when the market’s doing well, your money’s going to grow.”

PW: Okay, so he is drawing the chart, Evan, that I just described for you.

EB: Yeah.

PW: I don’t know. I am not a compliance attorney.

EB: Correct.

PW: But is that legal to actually draw, physically sit there and draw all of this stuff?

EB: Yes.

PW: It is? Okay.

EB: Yeah. Now, what he can’t do is highlight, outline stuff on printed sales literature.

PW: That’s what I’m thinking.

EB: So he probably would have to show him that deal. But just like I use a whiteboard a lot to explain concepts, he’s totally fine, but he can’t be circling stuff on the sales piece and all that.

PW: Draw on the sales pieces.

EB: Yeah.

PW: Okay. That’s what I was thinking of. It just seemed to me there was something, I remembered somewhere hearing that you’re not supposed to do that. But it’s not that he can’t draw.

Okay, got it. All right. So that was one of those things I was wondering about.

FE: Go north. Cool thing is when the market drops, which is the red dotted line, we have an airbag pop out and it protects your money. At that point, your money will just stay level, which is the light blue dashed line.

When the market goes back up, your money will start to rise again. And then when it drops, the airbag will pop out again and keep your money level.

And that will repeat as long as you have your money in an annuity. That was the entire presentation.

PW: That’s it. That’s the entire presentation.

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I assume what he means by that is that we’re not going to talk about how very limited the upside potential is when the market does go up. 

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We’re not going to talk about the cap rates. We’re not going to talk about the participation rates. We’re not going to talk about the fact you don’t have any dividends that are paid.

We’re not going to talk about that we’re typically only tracking one or a couple indexes, that’s it. No diversification there either. We’re not going to talk about any of the stuff that might lead you to go, “Maybe this isn’t the best thing.”

EB: Yeah.

Ignoring the Disclosure

EB: I want to go back to something he said, and I want to reframe it, because I think this is important. And a lot of times when we talk to people in the office, we reference the 20 must-answer questions.

PW: Yes.

EB: What are the questions you should be able to answer yes to in order to make good investment decisions, and stuff like that. I think he is equating intelligence with interest. And so I would agree with them that a lot of clients probably don’t want to hear the minutia of what goes on inside the contract.

PW: I agree.

EB: And they’re blissfully ignorant. Not stupid, but ignorant.

PW: Right. There’s a difference between ignorance and stupidity.

EB: “Hey, I like this airbag thing. It makes sense.” And they don’t want to read the fine print. I think maybe that comes from, I don’t know, “Well, I’m not going to understand it, so I’m not going to read it.”

It’s interesting, where this came from. I was listening to a podcast driving up here, on AI, and there was an analogy of using AI and so forth, and how many of us read the subscription agreement, the privacy statement when we get a new phone.

PW: That’s right.

EB: I just say, “I agree.”

PW: “I agree,” yeah.

EB: I don’t read 40 pages.

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I think people are so used to ignoring disclaimers or disclosures and so forth, that it just becomes a habit. 

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Now, it’s not an unfortunate outcome, but I think it’s just a habit.

PW: Yeah. It’s CYA for the insurance company, or for the tech company in this particular instance.

People don’t even pay any attention, and they don’t find out that there has been a problem until many, many years later, when they don’t have the returns that they should have had or they run out of money. And then all of a sudden, it becomes an issue. But it’s too late.

EB: Absolutely. Right.

PW: It’s like, I had a situation where I was dealing with an attorney and a client, and this guy, saddest story, he had lost some money. Lost a lot of money in this investment. And what he didn’t want his wife to know is that he lost probably twice as much as she thought.

What ended up happening was, the attorney, I brought in an attorney friend of mine, and I said, “Is there anything we can do? Is there anything we can do for these people?” And he looks at it and he goes, “I’m sorry, there is nothing.”

And I said, “Why?” He said, “It was all disclosed. All of these risks were disclosed and there’s nothing that we can do.” It was just a sad, sad time.

EB: Yep.

Nice Financial Advisors

PW: You have that, and the other thing you have is this, and I’ve seen this many, many times. I remember one case in particular, this guy was probably one of the nicest guys you’ll ever meet if you just talk to him, a financial advisor. Just gold. Super, super nice guy.

Well, we ended up with an investment statement of his. Client brings it in and says, “Hey, can you take a look at this?” I looked at it and there were options, contracts, they have futures in there.

There were all kinds of just awful, awful things inside of this investment portfolio. And the guy had lost, I want to tell you, it was like $400,000, something like that.

EB: Oh, wow.

PW: For him, that was most of his net worth. He maybe had $800,000, so maybe it was about half of his net worth that had been lost in this thing, which is just huge, devastating, terrible.

But here’s what happened: The guy would not do anything legally regarding this thing. And part of it is just the embarrassment.

The thing is that this advisor was a nice person. And they’re probably going, “I like this person.” And it’s hard to really get upset with somebody that you like.

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A lot of times financial advisors are super, super nice, and that’s why a lot of times this happens. It’s an emotion-based decision that we talk about. 

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We talk about fear of the future, people have fear of the future, they want to predict the future. They look at past performance. Everybody tells them that they’re the best, and then what they do is they just throw their hands up and they go, “I don’t know what to do.”

So what they do is they run with their emotions, and maybe it’s greed, maybe it’s fear, maybe it’s loyalty, maybe it’s they just like the person. And that’s an emotion-based decision. And hence the reason a lot of these problems perpetuate, and it’s sad.

But I just thought you guys would maybe find that interesting. Because you don’t get to go inside of a sales presentation on learning how to do the sales.

EB: We’ve got to put that on the website.

PW: You might be in the sales presentation, but you don’t get to actually hear how the presentation was put together and the thinking behind it.

EB: Yeah.

PW: It’d be like sitting there and going, “How do I sell a time-share?” Well, how do they teach people to sell a time-share?

I had a friend of mine, a dear friend of mine, teaches finance all over the country and did for years, and one of the most valuable things that he taught me, years and years ago, was how cars were sold. That was an eye-opener for me.

It really helped me out in making sure that I and my family did not get taken advantage of when it came to buying cars, because I understood, because he used to sell cars, and he told us how it worked. Super, super helpful.

Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.