It dawned on me last week that I’m giving people advice and competing with other advisors who are just trying to make sales. There’s a big difference between the two. No one likes the hard-selling guy who only emphasizes the positives without mentioning potential negatives.
In fact, most people end up finding this site while trying to determine if a sales pitch is legitimate. As much as everyone hates it, lots of people still end up falling for it. Most of the people who contact me via phone, email or appointment mention regretting a past decision regarding annuities.
One of the clearest indications of this is in a short email I received a couple days ago. You all got the same email where I simply try to confirm you received the information you requested.
This person responded by saying, “Yes. I will look it over but my wife already has an annuity so she is not thrilled with the idea of getting another one.”
My response? “No worries Pete- it’s free information and you are not obligated to do anything. I hope you find some useful ideas.”
Someone sold these guys an annuity and for one reason or another they are not happy about it. There’s also a vague indication that he feels as though I might try to sell him a second contract. I know nothing about the guy and can’t tell if the first annuity is the right thing for him let alone whether it’s worth my time and effort to try and sell something else after a bad experience.
Learning the difference between sales and advice will give you a substantial advantage while you evaluate various strategies for asset management in retirement. Sales consist of highlighting features of a product or service in hopes of getting a buyer to commit. Advice centers around finding solutions to a problem that are in the best interests of a consumer.
Oftentimes sales start by creating a problem in order to solve it with a specific product. You should avoid anyone who first tries to complicate your life right before they recommend fixing the non-existent problem with something you don’t really need. Most of the mistakes people make are the result of a similar strategy. Advice provides justification for a particular strategy over another.
I’m not a very good salesman so I have been skeptical of the classic sales pitch since my entry into the financial services industry. That’s also why I almost quit about ten years ago. I got tired of being told to sell a new product because of a specific feature. I was told things like, “call everyone on your list and tell them about this new idea.”
Every product or strategy has a drawback but it’s not because of a negative feature in the product itself. A person’s individual situation is what makes it work or not. A Tesla is a great car but it won’t tow my horse trailer so it would be a waste of money for me to buy one. Yes, a few people have tried to convince me to buy a Tesla but it won’t be relevant for me until they make one with the towing capacity of a diesel truck.
Advice comes with a focus on what you want and need. More time should be spent trying to understand where you are in relation to where you want to be. Finding strategies based on sound advice takes time and patience. Sales happen fast without regard for specific variables that may qualify or disqualify the product for a given individual.
Some of you may remember a past newsletter I wrote: Some People Don’t Need Annuities. Go ahead and click the link if you’d like to read it.
The point of that post was to illustrate an example of my process. Good advice gives you different options to reach your goals. And I don’t mean just different annuity options. I mean different asset classes, all with specific benefits or disadvantages so you can decide which option is the best.
My process centers on the five keys of retirement, which are:
Income– First determine the amount of necessary and/or discretionary income a person needs in retirement
Market Volatility– Then find the amount of growth needed in the portfolio to meet goals and limit fluctuations in value depending on personal risk tolerance
Inflation– Position assets in a way that enables you to adjust spending levels in retirement
Control– Promote strategies that keep a person in control of assets throughout retirement so changes can be made when needed or as better opportunities arise
Legacy– Some people like the idea of leaving money to the next generation or a charity while others don’t mind the idea of bouncing the last check they write
Every individual has a unique feeling about each of the above variables and each person places more importance on some more than others. How you approach one can have a dramatic effect on another. The amount of assets you have and the number of years until retirement will also provide a foundation for realistic expectations. When it’s all said and done there are literally hundreds of results to the above formula.
Until this is figured out there is no way to determine whether an annuity is what you need. That’s why the guy who buys dinner for 30 people and tries to sell the same product to everyone should not be taken seriously. It’s the most obvious type of sales pitch and it won’t do you any good. The sample trays at Costco might be a good way to sell boxes of frozen food to random people but the same tactic is no way to influence people in regards to major financial decisions.
Sound financial advice results in good relationships and sales put people in a defensive position from the beginning. Nothing good comes from that. When people are defensive I can hear it in their voice. The conversation usually starts with those people trying to convince me why they shouldn’t buy an annuity.
So you all need to know that I am available if you want some advice about your situation. But if you expect me to jump in the mud with all the others who are competing for numbers then you have the wrong guy. I’d probably make more money doing it the other way but that’s not my style. Those who know me would agree.