Q: How to Boost Sales of Fixed Annuities
What are banks doing to boost sales of fixed annuities through their branches?
That's the question American Banker recently posed to investment product executives at four banking companies.
The issue is much on the mind of investment executives, because fixed annuities, once one of the hottest offerings at bank brokerages, have slipped this year.
Bankers have reported that per-branch sales have stalled, and a recent study by Sanford C. Bernstein & Co. even suggested that a long-term decline in annuity sales is under way.
While none of the bank investment executives interviewed for this article were that pessimistic, several readily acknowledged that sales are off. They said that is not surprising, given that yields on fixed annuities have plummeted in the past few years, in line with the drop in interest rates generally.
Still, the bankers said, some things can be done to attract customers to fixed annuities, which can fit nicely in the portfolio of a conservative investor in need of a tax shelter.
- Dominick Fontana
Vice president, insurance group First Union Corp.
We are increasing the sales force tenfold to boost the sales of fixed annuities. More than 2,000 branch employees are in the midst of obtaining licenses to sell annuities.
This requires a great deal of time and commitment for the bank, but we feel it will pay off in the long run.
We want to make sure our employees are properly trained and that the needs of the customer are met. There are also state requirements we must comply with.
Vice president Huntington Investment Co.
We profile every customer for need, risk tolerance, liquidity, asset size, diversification, age, and tax bracket.
From this, we determine what percentage of each customer's money should be in foundation investments (possibly annuities), income investments (bonds), and growth investments (stocks).
As far as products go, we want to provide the most competitive annuity products. Currently we offer Hartford and Keyport, our primary products.
We want to see annuity sales increase, but only in cases where it is appropriate for the customer.
Senior vice president, retail sales Compass Bank
Our 1995 fixed annuity sales are substantially higher than in any previous year. One important step we took was to hire 45 full-time dedicated personal investment officers with Series 7 and insurance licenses. They are trained to analyze customer needs and offer appropriate investment products, which includes fixed annuities.
To increase sales, we have integrated the officers with our branch sales people with Series 6 licenses. We created a system in which everyone wins when an annuity sale is made, irrespective of who closed the sale.
Strong emphasis is also put on profiling the customer. It is important to understand and satisfy each customer's investment needs before introducing a product. We don't just push a product.
President Hibernia Investment Securities
We don't expect to see very much activity in fixed annuities for the remainder of this year. Rates on fixed annuities have been coming down for the last few months, and the stock market is receiving a lot of attention.
There has been a shift in what our customers are looking for in an investment. The variable annuities seem to be very popular for our customers, because CD rates are competing with the fixed annuity products.
Boosting sales of fixed annuities is a matter of continuing to train the people who are in a position to sell annuities, and to focus on the tax- deferral aspect of the investments.