Thanks so much for having me.

Harry Stout: Welcome to Insurance Insights sponsored by Creative Marketing. Since 1984, Creative Marketing has focused on helping agents reach their goals and grow their business. I’m your host, Harry Stout. During August of 2011 the Federal Reserve made an unusual promise to the financial markets. It stated that it would hold interest rates to near zero levels through at least the middle of 2013. While this was a welcome announcement to prospective borrowers, it struck at the heart of retirees and

pre-retirees who need higher yields to create income.

Today’s consumers are faced with the prospect of earning less than 1 percent return on their savings. At the same time, they’re fearful of losing principal with equity

investments yet need all the income their savings can generate. What many of these impacted people are finding is that today’s fixed annuities can help bridge their income gap using newly added product benefits. Today we will discuss how consumers are reacting to this challenging and how financial professionals are designing strategies to help them.

Our guest today is Sheryl Moore, President and CEO of Moore Market Intelligence. Sheryl’s also the founder and creator of several competitive intelligence tools including annuityspecs.com, lifespecs.com, and annuityspecs.com’s index sales and marketing report. Moore Market Intelligence specializes in providing competitive intelligence tools to the insurance industry, particularly the index, life, and annuity markets. Sheryl

provides competitive intelligence, market and research, product development consulting services, and insight to select financial services companies. Welcome Sheryl.

Sheryl Moore: Thanks so much for having me.

Harry Stout: Sheryl, there’s constant conversation in the media today about the low level of interest rates available to consumers, and what are your customers telling you about consumer interest rate worries? What concerns consumers the most?

Sheryl Moore: Well, you know, that’s an interesting question. Um, in a lot of the work that I do at Moore Market Intelligence, I do a lot of education via webinars,

teleconferences, speaking engagements; and it’s always so amusing to me to see that, um, other people are so afraid of public speaking. And in fact, last year I know that it was cited that the No. 1 fear of Americans was public speaking. Coincidentally, this year that has changed. The No. 1 fear of Americans is now outliving one’s retirement, and that speaks very strongly to the value proposition of annuities.

Harry Stout: It sure does, Sheryl. I think that that’s an amazing change in a short period of time.

Sheryl Moore: Oh, it is, and, and two such totally different fears, isn’t it? I think that, um, 2008’s market collapse has fueled that tremendously. Um, interestingly though, uh, fixed annuity rates, and even indexed annuities, which are a type of fixed annuity, their rates are really depressed as well. Many times people don’t realize that, um, there are outside factors that affect the rates that are offered on these financial services products, just like their mortgage or their car loan; and that has led to a lot of frustration from advisors who are looking to provide retirement income solutions to their clients. Now that being said, Harry, I will say that, um, the fixed annuity is certainly more attractive to consumers today than the alternative.

Harry Stout: Sheryl, given the significant change you just described, uh, uh, to us, what do you think our listeners can do to better understand specific consumer needs?

Sheryl Moore: Well, that’s a good question, Harry. The thing that I find most in interacting with consumers is that they don’t have a real strong understanding of what their choices for retirement income products are, and so they’re very quick to take the advice of somebody who’s a professional. Um, there are lots of different types of professionals, though, and not all professionals sell the same types of products; and so I think it’s really important, now more than ever, for listeners to take control of their retirement, do a little research and find out what is the best vehicle for them, because it differs based on their risk tolerance, Harry.

Harry Stout: No, I, I can see that, and so really what you’re saying is pro, financial professionals today really need to understand and spend time with their customers, really understand those needs, and make sure the individuals are comfortable with the product recommendations that are made.

Sheryl Moore: Absolutely, and one thing that could, um, really bear some stating, some better education, is that, um, there are different sales for fixed annuities. Maybe the policyholder is looking for accumulation and the ability to earn more interest prior to retirement. Maybe their primary concern is providing that guaranteed lifetime income that they can’t outlive. So an income sale’s gonna differ from the accumulation sale ‘cause they’re saying hey, I’m interested in taking those payments quite soon. Um, I wanna make sure that I have an income I can’t outlive. And then we even have some people who are looking for death benefits or other features than their fixed annuity. It’s important for the agent to listen to their client and make sure that they fully understand what they’re trying to accomplish with the annuity that they’re considering.

Harry Stout: Sheryl, building on what you’ve just said, what specific features and benefits of today’s fixed annuity products are agents and consumers most excited about? What are they buying, and why?

Sheryl Moore: Well, you know, um, the indexed annuity is specifically becoming very popular as a result of those market conditions, and in fact, one out of every two fixed annuities sold today is an indexed annuity. And that’s really big news when you consider that these products have only been in existence since 1995. The other feature that I would say is really garnering a lot of interest right now is the guaranteed lifetime withdrawal benefit rider.

Harry Stout: Oh, and, and, and, and, and Sheryl, what is that? Could you describe that for our listeners?

Sheryl Moore: Yeah. It’s, um, you know, just an optional benefit that can be elected when you purchase an annuity, and what this rider does is provide that guaranteed lifetime income that the purchaser can’t outlive. In the past, in order to provide that guaranteed lifetime income, the policyholder has had to annuitize their contract or buy an immediate annuity. And things that come along with annuitization or immediate annuities include inflexibility, loss of control of the funds for the agent, so if the policyholder ever changes their mind or their circumstances change, the agent isn’t in a position to help them; and then really, honestly, um, abysmal commissions for the agent. The guaranteed lifetime withdrawal benefit on a fixed or indexed annuity is really an alternative to annuitization or that immediate income annuity. What it does is

guarantees the lifetime income that the purchaser can’t outlive, like those other benefits do, but unlike those other benefits the GLWB rider provides flexibility to the purchaser. Harry Stout: This is a great discussion. Let’s take a short break and when we return I’ll have a few more questions our listeners should learn from.

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Harry Stout: We’re talking with Sheryl Moore about today’s low level of interest rates, and how financial professionals can help their clients with the income gap challenge. Now Sheryl, where should financial professionals go to get the best information they need to better understand the new fixed annuity offerings and the companies that produce these products?

Sheryl Moore: I strongly believe that annuityspecs.com is a tremendous resource for insurance professionals when they are looking for reliable resources on fixed

annuities, but you know, another great resource is the marketing organization that the agent’s with. I’ll tell you, in my interactions with these folks for the last 15 years I’ve never seen people that are more educated, not only on the products that they have

think that they are a real, untapped resource that’s very credible and educated on fixed and indexed annuities.

Harry Stout: And, and I would agree with you there. I think that the marketing

organizations that exist today, and I’ve been in the business over 25 years, these are, uh, really high quality, uh, well education, knowledgeable organizations that can really help the financial professional find the right product to meet the consumer need. Sheryl Moore: Absolutely Harry.

Harry Stout: Sheryl, given all that we’ve discussed today, what is your outlook for future fixed annuity sales?

Sheryl Moore: Well you know, Harry, um, I would say that face money products such as fixed and indexed annuities are going to see an increase in sales but for one thing. Um, the fixed annuities are really in a position where they’re so unattractive, and because they’re commoditized and sales of the product are purely a function of rate, I think we’re not going to see tremendous increases in sales of the fixed annuity variety. However, indexed annuities are going to see a tremendous increase in sales. In fact, I’ve had several companies that are very non-traditional players, highly rated, um, very old companies, that have been getting into the indexed annuity market and showing interest in it, simply because their variable assets have fallen as a result of consumers getting out of the market so they’re not exposed, and then their fixed annuity assets are also declining because of rates being so unattractive; so they’re essentially being bullied into developing the indexed annuity. Now that being said, I am projecting record sales of indexed annuities for the second consecutive year at the close of 2011. We actually are working on compiling the fourth quarter 2011 sales right now. Last year we did $32.3 billion. That was a record for indexed annuity sales, but I think we’re gonna surpass that this time.

Harry Stout: And it makes a lot of sense. If consumers need something that offers a reasonable base rate of interest; on top of that, very well positioned, guaranteed

minimum withdrawal benefits, and the protection of their principal, it seems that all those things come together to bode well for the future of, uh, indexed annuity sales.

Sheryl Moore: I absolutely agree. There’s no other product that is such a strategic position to address all of those needs as the indexed annuity is.

Harry Stout: Sheryl, I wanna thank you for being with us today. Your thoughts and comments will help producers better work with consumers as they consider the benefits annuity products have to offer in meeting the income gap challenge.

Sheryl Moore: Well thank you, Harry, for allowing me to work with you in the educating of our distribution.

Harry Stout: Sheryl, thanks again. It was a pleasure to have you with us today. Insurance Insights is distributed nationally to inform and educate producers on new trends, products, and consumer needs. Our hope is that the information presented will enable you to be a better financial professional. We would like to thank our sponsor, Creative Marketing, for their support. If you have an idea for a future topic, please send them to me at [email protected]. Again, that’s

[email protected]. Thanks for listening.

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