Among all the interesting comments and the absolute nonsense talked about annuities recently, one particular idea struck me as a beacon of sense in an otherwise nonsensical world. This is the idea that everybody at retirement should have 15 minutes with an expert.
In such a short time I think the following issues should be discussed:
- Explain the key issues and options
- Talk about the client’s objectives
- Discuss some possible options
The first part of this 15 minute discussion is probably the most important and should involve painting a mental picture of the key issues including an overview of the various options and the factors that need to be taken into account such as health, the future effects of inflation and the possible need for flexibility.
On the whole people are not stupid. They may not be especially numerate or understand jargon but if explained in the right way they will quickly understand the key issues.
Explaining things simply is not easy because in order to do this you need to really understand your subject matter and have the confidence not to hide behind jargon.
Anybody who wants to know how to do this should hear some of the financial experts on BBC Money Box who can explain very complicated issues simply and quickly.
I used to like talking to taxi drivers. “I have been reading about these annuity things in the Daily Mail and they say they are a con,” to which I would reply, “No, they are not a con but the only policy that will ensure that you get paid a guaranteed income as long as you live”.
To which the reply was often, “I understand now governor, and did I hear you right; I can get a higher income if I tell them I smoke and am overweight and that if I kick the bucket the income goes to the Mrs. I like the sound of that.”
The next step is to engage and listen and to ask the client what their priorities are. Back to the taxi driver: “What I really want to do is to give up the cab and spend more time in my villa in Spain.”
I knew we should have launched the ‘taxi driver annuity’ which would have been paid in Euros.
One of the best answers I received was: “I just want to end up in the same place as my contemporaries who have final salary pensions and just get a regular amount each month.”
This turned what looked like a no brainer drawdown for a £1m fund into a combination of guaranteed and investment-linked annuities.
Finally and without making a specific recommendation or sale, because that only comes after all the compliance stuff, you can point someone in the right direction.
Don’t get me wrong; there is no compliance short-cut, whether it is advice or a guided sale. However, a lot can be done in a short time to help people understand the issues and to point them in the right direction.
This seems like common sense to me – and if you want some of that, go and talk to a taxi driver.
Billy Burrows is head of business development at Annuity Line