In this post, we want to step back and take a look at the big issues when selling in the COVID-19 economy.
We’re bombarded every day by economic statistics and survey results, but what do they all mean? How can you use them to create a business plan for the rest of 2020? Let’s try and chart a course based on some recent headlines and survey results.
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The Problem: Small Businesses in Trouble
The Problem: Women Hit Harder with Retirement Shortfall
The Opportunity: Younger Consumers Are Buying Life Insurance
The Problem: The Shortfall in Social Security
The Problem: Depleted or Underfunded Qualified Accounts
The Opportunity: Increased Consumer Saving
The Problem: Low Interest Rates Affecting Retirement Planning
The Problem: Consumers Fear Rising Taxes
The Opportunity: Consumers Want Guaranteed Lifetime Income
The Problem: Small Businesses in Trouble
More than 60% of small businesses say their revenue is still less than three-quarters of what it used to be before the pandemic. Only 16% think they can maintain payroll without another stimulus package. Only 37% think they’ll make it through another shutdown. That’s all according to a survey of 1,500 businesses that participated in a Goldman Sachs training program.
More than 60% of small businesses say their revenue is still less than three-quarters of what it used to be before the pandemic.
What can we do?
Business owners facing the collapse of their enterprise don’t want a call to ask if they’re interested in making a succession plan. But they might be receptive to a friendly check-in call asking how they’re doing and if there’s anything you can do to help. This is where a little compassion and patience can go a long way. Let them talk, let them vent, and offer to help if you can.
For example, you can offer to do a policy review, or offer to look at their retirement plan and/or personal insurance situation. Whatever they decide to do with the business, they still need to make sure their protection is in place and they have a plan for retirement.
The Problem: Women Hit Harder with Retirement Shortfall
Even before the pandemic, women faced a number of challenges in retirement planning. According to a study by the National Institute on Retirement Security, older women receive about 80% of the retirement income their male counterparts receive (thanks to the gender pay gap). Spousal caregiving and divorce also hit older women hard, further diluting their ability to support themselves in retirement.
Older women receive about 80% of the retirement income their male counterparts receive.
And now, with caregiving and home-schooling needs at an all-time high, women are picking up more of the slack, leading to reduced working hours. A New York Times poll found that 80% of moms say they spend more time homeschooling the kids than their spouse. The same poll found that in couples with both spouses working remotely, 28% of women and 19% of men were working fewer hours.
Less work means less pay and smaller contributions to retirement accounts. These setbacks are going to make the shortfall even worse in the long run.
What can we do?
Get the word out! Contact the women in your book of business. Tell them about these stats, and ask if they’re experiencing anything similar in their lives. Ask them if they’re worried about the growing shortfall in their retirement accounts. Ask them if they’d like to review or create a plan, talk about ways to overcome these challenges, and make sure they have sources of guaranteed income during retirement. If you’re ambitious, you could host an online webinar on this topic and put a few dollars behind it with social media ads.
The Opportunity: Younger Consumers Are Buying Life Insurance
People under 45 are the most likely to apply for life insurance right now, as opposed to seniors (60+) or people age 45-59.
A new MIB Group survey has revealed that people under 45 are the most likely to apply for life insurance right now, as opposed to seniors (60+) or people age 45-59. Overall, our industry has seen a big year-over-year increase since last spring. Apps were 5.2% higher in May, and 1.2% higher in June. Not surprisingly, however, fewer seniors have applied every month since March, when temporary underwriting rules went into effect for most carriers.
What can we do?
Target these age groups with customized messaging about life insurance. Look at the revised underwriting guidelines for your preferred carriers – what’s their cut-off age? Use that in posts, emails, and social media ads geared toward seniors and near-retirees.
Here are just two quick examples:
- For seniors: “If you’re healthy and under 70, you can still get life insurance coverage.”
- For younger customers: “Life insurance during a pandemic? Yes, please. It’s fast, easy, and 100% contact-free.”
The Problem: The Shortfall in Social Security
By 2021, Social Security will cost more than the program collects via paychecks. That’s according to the new 2020 report from the Social Security and Medicare Boards of Trustees.
Why the shortfall?
Mostly because there are more Baby Boomers collecting benefits than there are workers paying into the system. And COVID-19 is making everything worse. More unemployment equals fewer dollars from Social Security payroll taxes. There just isn’t enough money flowing into the system to keep from dipping into reserves. Barring future action, those reserves will be depleted and the system will be insolvent by 2035.
Barring future action, Social Security's reserves will be depleted and the system will be insolvent by 2035.
To make this situation worse, many seniors start collecting Social Security before full retirement age, which diminishes the amount they get. According to Theodore Sarenski, author of Social Security and Medicare: Maximizing Retirement Benefits, a whopping 73% of retirees collect benefits earlier than full retirement age. For 66% of people collecting benefits, Social Security is the majority of their income. But taking benefits early (at age 62, for example) reduces benefits by 25% for those born between 1943 and 1954. The percentage is even higher for those born in 1960 or later.
This creates a perfect storm of inefficiency and insolvency, for the system and its beneficiaries. (We won’t even talk about what it creates for people who aren’t slated to retire until well after the insolvency date.)
What can we do?
Ask clients and prospects if they have a backup plan.
Ask them if they know how dangerous the current underfunding situation could be. Is Social Security going to be their main source of income in retirement? What would they do if it weren’t available? Then ask if they’d like to reduce or eliminate their dependence on a system that might not be there by the time they need it.
Products like annuities and cash value life insurance can help make up for what’s not coming from Social Security. It’s no longer a question of creating an extra stream of income. It may be a matter of creating the client’s only stream of income during retirement.
The Problem: Depleted or Underfunded Qualified Accounts
49% of the 14,000 households surveyed faced either job loss, a pay cut, or reduced hours.
This problem affects everyone who has lost their job or had their working hours cut. The Secure Retirement Institute (SRI) surveyed more than 14,000 households and found that 49% faced either job loss, a pay cut, or reduced hours. As a result, they were more likely to dip into their qualified account to help pay for living expenses because they didn’t have a big enough emergency fund.
When something affects half of your survey respondents, it’s more than a trend – it’s an established fact.
But what about those who are still employed? Does that mean they’re in the clear?
Nope, they’re worried too, according to a Lincoln Financial Group Survey. Nearly 70% of consumers worry that a change in taxes will impact their retirement savings, according to their results.
So we’ve got consumers on both sides of the employment spectrum, all worried about how to pay their bills…some now, and some later.
What can we do?
Do a better job of publicizing the features of cash value life insurance.
Do a better job of asking clients if they’re interested in benefits like:
- Tax-free death benefit for their family
- Savings on a tax-deferred basis
- Savings that don’t affect your tax bracket, Medicare premiums, or a child’s ability to qualify for federal student aid
- Income-tax-free policy loans and withdrawals for another retirement income stream
The Opportunity: Increased Consumer Saving
In April 2020, Americans had a 33% savings rate.
There’s a bright side to lockdown and social distancing: people are saving more money because they’re not going out as much. In April, Americans had a 33% savings rate, which is huge. In Europe, an ING survey found that 39% of men and 47% of women spent less during the pandemic.
The changes people are making now – going out less, working from home, traveling less – may stick, especially once people see their nest eggs grow. That gives financial advisors everywhere a great reason to keep marketing through the pandemic.
What can we do?
Use real numbers in your social media, paid ads, and email marketing.
How much does it cost to eat out twice a week for a month? Calculate that number, put it in your marketing material, and ask people if that money is better spent on take-out or on protecting their families.
How much does it cost to take a family of four to the movies (with snacks)? Or to an amusement park? Those experiences aren’t feasible now, but since the money’s still there, tell prospects it’s time to do something your family will thank you for years from now.
The Problem: Low Interest Rates Affecting Retirement Planning
Since March, the Fed has cut interest rates to near zero.
While that’s good news for home buyers, it’s not good news for clients and prospects working on their retirement planning. They’re having a hard time finding products that generate enough interest to create a viable income stream in retirement.
Bank CD rates range from 0.25% to 1.2%.
Bonds and bond portfolios aren’t any better – a Series EE savings bond earns 0.10% right now.
And there’s no indication on the horizon that rates will rise anytime soon. You might already know that ultra-low interest rates are making it hard for carriers to keep offering guaranteed universal life policies. It’s why Prudential’s UL Protector is leaving the market on July 13, and it probably won’t be the last to bow out. Near-zero rates have dealt a blow to indexed annuities, too.
Ultra-low interest rates caused Prudential to pull its UL Protector from the market.
What can we do?
Talk to prospects about fixed annuities.
Fixed annuities offer security. They offer a dependable income stream. And, if the interest rates go up in a couple years, that growth could end up creating a viable secondary income stream during retirement.
- When interest rates are low: Talk about creating peace of mind with a guaranteed income stream for life. If other interest- or market-dependent retirement vehicles can't produce as much income as desired, the security of a guaranteed check every month can relieve anxiety. Bonus: the money in the annuity grows tax-deferred. If your client might need access to the money in the meantime, look for a high withdrawal rate or a guaranteed lifetime withdrawal rate.
- When interest rates rise, or for high-net-worth clients: Talk about creating a secondary retirement income stream based solely on the interest from a fixed deferred annuity. The cash still grows tax-deferred, and your client only owes income tax on the interest paid out.
The Problem: Consumers Fear Rising Taxes
Between the government stimulus programs and the reduced tax revenue generated by fewer employed citizens, our government will face hard choices in the near future. How can they make up that shortfall? They can print money, raise taxes, lower benefits, or do all of the above. If you read Van Mueller’s newsletter, you know the odds on that one.
So if taxes are only likely to go up in the future, isn't it smarter to pay them now, when they’re lower?
What can we do?
Talk to prospects and clients about cash value life insurance.
Clients can sock away more money in their life insurance policies than they can in a qualified account, and it still compounds tax-deferred.
The strategy here? Use after-tax money to generate tax-free retirement income. Clients can sock away more money in their life insurance policies than they can in a qualified account. Plus, that money still compounds tax-deferred. But instead of the entire account value being taxable upon withdrawal, only the cash value gains are taxable on withdrawal with life insurance. Keeping taxable income low in retirement also helps keep Medicare premiums low, further reducing expenses.
The trick here is asking prospects questions instead of launching into a sales pitch. Straight from Van Mueller’s May newsletter, here are a few starters:
- If it were possible to never lose money ever again, would you want to know about it?
- If you could control how much income tax you paid rather than letting the government be in control, would that be valuable information?
- Would you like to enter every one of these economic downturns confidently rather than fearfully?
The Opportunity: Consumers Want Guaranteed Lifetime Income
Know any products that fit the bill? ;)
According to the sixth annual Guaranteed Lifetime Income Study (GLIS) by Greenwald & Associates and CANNEX, there is increased consumer interest in guaranteed lifetime income. 71% of clients said this was “a highly valuable addition to Social Security,” up from 67% who said the same a year ago.
Only 14% of surveyed advisors thought the average client wanted to hear about guaranteed lifetime income...but 42% of consumers said they really wanted to know or already own an annuity.
Surprisingly, only 14% of surveyed advisors thought the average client wanted to hear about guaranteed lifetime income...but 42% of consumers said they really wanted to know or already own an annuity.
You can help close that gap. Bring up guaranteed income in more client calls. Who couldn’t use something good that comes with a guarantee, especially these days?
What can we do?
The next time you do an annual review, bring up guaranteed income. Or the next time you talk about retirement planning, bring up guaranteed income.
Based on the survey result, your clients want to know more. However, they they probably don't connect the word “annuity” with the concept of “guaranteed income.” Bring up the concept of guaranteed income as one income stream that can provide stability and supplement their qualified retirement accounts.
That’s our look at selling in the COVID-19 economy.
Which of these problems are you seeing most among your clients and prospects? Drop a comment and let's brainstorm solutions and sales ideas together!
