Talking Points With Clients Who Love The Market | 7 Figure Annuity Sales Podcast | Ep. 315

Welcome back to the Seven Figure Annuity Sales Podcast. It's Caleb here and yet again rolling solo. I've got some, some fun stuff to talk about today, actually. Like I said, it's, it's another week of me by myself. Couldn't get Chad on here this week. We're hoping to get him back for next week's episode. But again, it's, it's a, it's a busyness. I mean, this time of the year, like I've told y' all before, is one of the busiest times of the year for Chad from a production standpoint. Because the production opportunity.

When you can meet with somebody this time of year, they are often very, very, very serious clients. They're not going to just meet just to, you know, kick tires, not during the holidays. So if they're meeting with you during the holidays, they're pretty intent individuals. And so that's, to me, all the more reason to keep the pedal down and really try to meet with people because you'll have some of your, your best clients come this time of the year. But anyways, Chad's still writing some business. He's staying busy, but like I said, hoping to have him back next week. But what I am talking about today is something that's come up recently for me in conversation with one of the agents that I work with. And it's really talking points with clients who love the market. Let's be honest, we've had those, we've all seen those where you've got somebody that because of some kind of recent gain, they are just really, really, really high on their risk positions. They like it because of the recency of growth that they've seen. And in this particular instance that I was talking with this week with one of the agents that I work with, it was like a $1.5 million portfolio. And two years ago it was a million dollar portfolio. So the guy did 50% return in two years time. And he's having conversations with this agent and he's just being honest about the fact that he likes the market, he likes the risk, he likes the ups and downs. And logically. So if I was in something that, you know, paid me 50% over a two year period, I'd be pretty happy with that thing too. And so I want to talk through just some, some talking points, some things that you can be creating conversation about, some questions that you can ask and, you know, maybe move the needle forward. But to lay the foundation here, number one, I want to stress if you're not a securities licensed Individual, you cannot advise somebody to liquidate their securities. You can't recommend it, you can't advise it. So all you can do is answer questions about what you do and try to ask them questions to help understand where they're coming from, their mind. And sometimes they'll come to a conclusion of, oh, I do want to buy the annuity, and sometimes they won't. And that again, is one of those lines that you can't cross. If you're an insurance only agent, you cannot advise people in or out of a security. That has to be their decision. You can facilitate it if they decide to, but it has to be their decision. And so all we're doing is trying to have conversation with somebody to understand where are they coming from and are their perception about what we're offering and the benefits that what we're offering brings to the table, are those perceptions correct, do they need correction? And is there actually something that's going to benefit them here that's worth a conversation? So when we're dealing with somebody who loves the market, I think it's important to understand a few kind of baseline things here. Number one, nobody maintains a risk position that they think is going to be going down soon.

If you think that you're coming into a loss, period.

You get out of that position. And so the mentality that these people have when they like their risk positions is that they think that they're going to continue to go up. So the fact that they're, you know, having conversation with you about the benefits of your product, but also bringing to the table this idea that, hey, I kind of like where I'm at, I like what it's done. You've got to understand that them wanting to stay or talking about staying in that position is because they think it's going to go up. So they are, for lack of better terms, bullish on that position.

The other thing that I think is an important thing for you to always know and bring up, when it's appropriate to bring up, is that people will talk about their recent gains as if they've capitalized on those gains. So in the instance of this particular agent who I was working with and their client, this client was talking about how he made 50% over the last two years and how his retirement portfolio is now worth $1.5 million. And here's the thing, it's true that today that's the case.

But it's not necessarily going to be true until it's actually realized, until it's actually, he takes that gain.

And that's just the reality of investments. It's the same for, for real estate, for housing. It's like, I have a, I've got a house, I own a house, I'm in my house right now. My house is worth X amount of dollars right now.

If I don't sell my house at that amount of dollars, it's not worth that amount of dollars in actual dollars to me. So for these clients who are talking about, oh, I've made 50%, it's like right now you have indeed made 50%.

But until that's actually a realized gain, it is like their brokers and financial advisors often talk about the losses being paper losses. It is just a paper gain because it hasn't been taken. It's not yours yet. So a logical question I guess you can ask when somebody is, you know, I guess in a roundabout way, you know, bragging a little bit about what they've, what they've done in their, you know, accounts. Ask them how much of that is yours?

And the reality is they don't know because they don't know what capital gains tax is going to be and they don't know what the market's going to be. So you can, how much of that is yours right now? How much of that is yours in five years? How much of that is yours in 10 years? And none of that they can answer. And the reason is because they know intuitively that until it's actually a realized gain, it's not a realized gain, it's in their account right now. And that goes up and that goes down and we don't know what tomorrow holds. And so because we don't know what tomorrow holds, we don't know how much of that is actually ours.

So then to make a retirement plan, you could ask this question, so would it be fair to say that making a retirement plan based on an account that you don't know what the value of that account is going to be in five years or 10 years and ultimately don't know how much you're going to be able to draw on it in five years or 10 years or 15 or however long your retirement ends up being, would it be fair to say that that's a little bit of a, of a.

Like a shaky foundation, that's a kind of a risky place to be trying to make a 20 year plan when you don't even really know what that's going to be worth tomorrow, let alone 20 years. And for Chad, the way that he asks this question is he'll ask people Just what do you think? What's the market going to do tomorrow? What's the market going to do in five years? What's the market going to do in 10 years? And the reality is nobody knows. Nobody knows what the stock market's going to do. And because we don't know, it is always the unknown of things that drives the need for insurance. Look at homeowners insurance, health insurance, life insurance. Nobody buys life insurance because they think that they're going to die in 10 years. They buy it because they don't know that they won't. Nobody buys homeowner's insurance because they think their house is going to catch fire next week. They buy it because they don't know that it won't. Nobody buys health insurance and nobody buys health insurance because they think they're going to end up hospitalized. They buy it because they don't know that they won't. So it is always the unknown that prompts the purchase of insurance. Well, when we look at annuities, by effect they are a type of insurance.

You can make it out to be whatever type of insurance you want it to be. If you're using an annuity for guaranteed lifetime income, then you can make an argument that is retirement income insurance. And again, that's a, that's a marketing term, that's not a technical term, but it is, it is insurance at its core. It is not an investment. And that's one of the things that, you know, the insurance commissioners, they don't like. They don't want us talking about annuities from the standpoint of investment. You can't compare an annuity to equities. You can't compare an annuity to real estate. You can't compare an annuity to anything that's going to be subject to losses. You've got to understand that an annuity was originally actually just a form of income payments that you would receive. But then when you look at the dawn of the fixed indexed annuity, it was designed to be a bond alternative with a little bit more upside potential. So your guarantee might not be as good as like a fixed annuity or a myga, but your upside potential is higher. But it's still just an alternative to, to your quote, unquote, zero loss strategies.

It's not an investment and it doesn't share the same upside potential that investments have, but it protects from the downside. So looking at annuities from a realistic lens, that they're insurance, I think is important. And then asking the question, why do people buy insurance because they don't know that they won't need it. They could need it. And then bringing that conversation into the conversation about retirement. And at the end of the day, if 100% of somebody's retirement funds are at risk to market losses and volatility, what's ensuring those things? What's ensuring the fact that they don't want to go back to work? What's guaranteeing that they don't have to go back to work based on the amount of income that they are guaranteed to receive? Right. You look at a modern retirement and it's largely based around Social Security and then supplementing it. Well, you look at the history of Social Security and Social Security was created to be the supplement to something else that was already in place. And at the time it was corporate pensions. We don't have corporate pensions anymore. So what do we have? We have 401ks. I say that there are some corporate pensions still out there. It's very rare in few and far between. So what do we have? We have 401ks. We've got IRAs, we've got 403bs. We have these plans that people build up these lump sums of money and then they don't know how to distribute them in retirement. So their mind goes to, oh, I guess I'll just leave it in whatever it's in right now, and then just draw on it in retirement. Well, the problem is they don't know what the market's going to do and the losses that affect that or the gains that affect that. And they don't really know how much they can take in five years because they don't know what the value of that thing is going to be in five years. So it makes it really hard to make a plan when it's left at risk. And so these are the questions that you need to be asking people that quite frankly, they like their position in the market. And this is all fresh to me again, because I was dealing with this agent and this client earlier this week. So nobody stays in a risk position because they think it's gonna go down. They stay in a risk position because they're bullish on that. They think it's gonna go up. They talk about it as if it's theirs, but until it's realized, it's not. So paper loss versus paper gain. The brokers will tell them when they lose value in their accounts that it's a paper loss because if they don't need it, it is a paper loss. It only becomes a realized loss when they actually liquidate the loss simultaneously. It's only a paper gain when it goes up and it's only a realized gain when they liquidate the gain.

So now we're, we have those, like, baselines established. Here's some talking points, I guess, some questions that you can be asking people. I think, number one, it's always important to get into the mind of this individual. Why do they think the way that they think? Right. And so I like the question, what do you like about the ups and the downs? Like, if somebody is going to sit here and say, oh, I kind of like my, you know, risk portfolio. I like where everything's at. I like the, you know, all that. What do you like about it? Like, obviously, over the last few years, it's been great. Over the last decade, it's been phenomenal. So if all we like about it is, well, I've made some good money in the market, then the question logically becomes, well, what happens if you lose money? Do you still like it? And the answer to that would logically be, no, I don't. Okay, so we only like it when it's good. Yes. When we don't like it when it's bad. Yes.

From my perspective, that sounds like an indexed annuity because it protects you from the thing you don't like and it allows you to participate in the thing that you do. So you are either protected from those losses or still participating in the very thing that you love.

So you get the kind of the best of both worlds with just, I guess, a limitation on the top.

And then you get into the logical conversation of if you're not ever having to play catch up from losses, how much do you actually have to gain to end up at the same place or better? We've tracked it in a document that we call Benefits of Indexed Annuities with Annual Reset, where we go back to 2000 and we look at an indexed annuity with a participation rate on the S&P 500 versus what the actual S&P 500 has done. And they track pretty close and there are crossover points throughout. But the idea of what that shows is that you don't necessarily need all of the gain if you're not having to make up from all of the losses. And by not having to make up from all of the losses, if you get a portion of the gain, you can at times actually be in a better place, a higher place, dollar wise in your accounts. So again, this isn't. We're not trying to advise anybody in or out of. We're trying to have very realistic conversation about the way that math functions, the way that math works. And when you look at the facts of math, that's the reality of the situation. So again, it's not telling somebody, oh, I would recommend that you get out of this. No. And if they ask you, well, what do you recommend I do? You tell them, I'm not licensed to recommend you do anything. All I'm doing is positioning an idea, a thought that you have to come to your own conclusion about. And at the end of the day, that is really the essence of it. Moving on from that logically, when they say, and for this individual that I was working with this week, their whole thing of what they liked about the ups and downs the market was I like the emotional roller coaster. I like the not knowing, I like the anticipation. I like the you're not certain to have a gain, but you could. And so there's this kind of, you know, this romanticized mindset around it. And that's great. Love it. If that's where they're at. The question then becomes, can you still get that satisfaction after having hedged against the losses? In other words, can you only experience that satisfaction if all of your money is at risk, or can you still experience that satisfaction with the money that we do? You do leave at risk, you do leave in the market after having taken care of what you need to be guaranteed in retirement. If they can, then great. Now let's figure out, how much do we need to protect to hedge against what you're willing to lose? Right. And you only leave in there what you're willing to lose. But I do think that for the sake of somebody getting their mind around what's a reasonable amount to leave at risk and a reasonable amount to put into an annuity. There's a, I guess a formula that you can use just from a discussion standpoint. Again, it's not to make a recommendation that they do or don't move anything in or out of their securities. It's just purely to help them think through these big decisions that they have to make. And I will argue that, that if their broker or their financial advisor is not bringing up to them sequence of returns, risk in retirement, guaranteed lifetime income, creating your own personal pension plan, actually using Social Security as a supplement to, not, not something else, a supplement to your Social Security.

If they're not bringing it up, somebody needs to, to do right by that retiree. And so a good way that you can, I guess, formulate or think through some of these numbers is you look at an entire portfolio, the question I think becomes how much of that, dollar wise, are you willing to lose? If you have a million dollar portfolio, what can you afford to lose? What are you willing to lose of that million dollars? Now, now, logic would say you only risk what you're willing to lose, right? I mean, when you, you look at anything regarding betting, sports betting, they always tell you only bet what you're willing to lose.

So in a roundabout way, what I'm about to share is actually a little bit more, I guess, in favor of them leaving some at risk than even the betting institutions suggest. Okay? So you gotta bear in mind the betting institutions say only risk what you're willing to lose. So by that logic, if somebody says, oh, I can only afford to lose 300,000, then by that logic they should only have $300,000 in something that can lose value.

Again, according to the betting institutions.

My way of thinking about it is, is okay, because again, sorry, this is not flowing very well. But going back to our initial foundation, they think it's going to go up, right? If they're, if they're talking about keeping it at risk, they think it's going to increase in value. They think it's going to go up. Well, if it were not to go up, if it were to actually fall, how much do you think it would fall by?

And they say some percentage, right? And so they've given you a dollar amount that they can't afford to lose and they've given you a number that they think it would fall by.

Say they think it's going to fall by 30%.

And they say of my million dollars, I can really only afford to lose.

200,000. Well, the way that the formula shakes out is you take that 200,000 and you divide it by the 30% drop.

So they can only afford to lose 200,000. And they think that if the market would fall, that it would fall by 30%. So what you have to figure out is, okay, what is the dollar amount that if it was reduced by 30% would only equate to 200,000. You do that by taking the 200,000, dividing it by 0.3 and you get 666,000. Which means that on their million dollar portfolio, based on their numbers that they're saying they believe, then they should logically protect $333,000 of that account. Now you can make an argument one way or the other. I think you can look at that and you can say if we were to leave $666,000 at risk. Do you feel comfortable with that? In other words, what this $333 can get you in either guaranteed lifetime income or in just having that amount protected, does that give you peace of mind, leaving $666,000 at risk? And if it does, great. If it doesn't, what would? And so you're able to use kind of their. Where they're coming from as the barometer to help them think through how much of it would logically be protected. And again, you're trying to take. You're actually trying to take emotion out of it, right? So we're not fear mongering on risk. We're not fear mongering on market losses, okay? You look at the last 10 years, the market's been fantastic. If we got another decade of that, they'd probably be wishing they'd left it all in there. Okay? If we don't, then they're gonna be real glad that they took a portion out. So all you're trying to do is help them get to a point of comfortability. And if they leave that conversation with, I am 100% comfortable with all of my money at risk, then you've done your job. You can't advise them. You can't tell them, get in, get out. You've done your job. You've tried to help them think through it. They've come to a conclusion on their own, and that is their conclusion.

If in that conversation they decide that they want to liquidate X amount of their securities into something that's based on protection and guarantees.

Then great, you've got a client. And so that's really how I would encourage you to think about it, how I would encourage you to navigate those conversations. Like I said, we're trying to get emotion out of it. We're trying to get logic into it. And emotion can go both ways for both parties. Emotion can go positive or negative for the risk side, emotion can go positive or negative for the, you know, the annuity side, the insurance side, okay? So it's not to try to play it one way or the other. You're just trying to be real, honest, use math, use logic, use numbers, ask questions, understand where they're coming from, and have a logical conversation with this individual. And that's really what it comes down to. I'll keep you guys updated on that particular case as it progresses. But even in that instance, we ended up at a conclusion of for this retiree to feel comfortable, it was going to require like, half a million dollars of their 1.5. So leave a million at risk, they could lose it all. They could, you know, have another 50% gain in two years. We don't know.

But, yeah, that's, that's kind of the way that I would encourage you to approach it.

That's a wrap for today, and that's a long episode, especially for me being solo. But I do hope that this helps you guys, and if you have any questions about it, reach out to me, let me know. I'm happy to get on the phone and talk with you all through some of these concepts, if that helps you out, one on one. Anyways, happy selling.