How to Explain an Annuity to Clients


If you’ve ever sold an annuity, undoubtedly you’ve had to try and figure out how to explain the annuity to your client. Agents often overcomplicate this process and try to utilize financial and insurance jargon to make themselves be perceived as an expert, but the reality is that doing that often just prevents the client from understanding the product. 

Explain Things in the Client’s Terms

What I always try to help agents understand is that the mark of someone who truly understands how something works is able to communicate it in a way that the listener understands. If we truly understand annuities ourselves, then we should be able to communicate them in a way that the client understands. One way we can do this is by putting it in the client’s terms. 

By simply understanding what a client does or has done for a living, you can easily explain annuities in ways that they understand. For example, (I’m in Texas) if I’m meeting with a cattle rancher, I may illustrate how the product works by using cows as an example of money, and a ranch hand as an example of a broker or advisor. (From there you can fill in the blanks).

Or if I’m meeting with a bus driver, I might use passengers on the bus as an example of money and the destination as an example of a safe and secure retirement.

Analogies work beautifully for helping clients understand the concepts you’re communicating and literally every line of work, and even hobbies have ways for you to use their language in relation to your products. 

When you think in your client’s terms, it’s easy to explain things in a way that they understand. It’s important to not use financial jargon as a means of sounding intelligent, only use it when it’s necessary, but explain the function of the product in ways they understand.

Simplifying Annuities

Often, clients already perceive annuity products as complicated, and even agents can struggle to understand the ins and outs of the products they have available to them, but realistically annuities are pretty simple, and it’s important to intentionally study and understand exactly how your products work so that you can simplify them to clients. 

I like to think of annuities as vehicles. If an annuity is a vehicle, then the funds they use to purchase it are the contents of the vehicle, and there is a destination they want to get to. Maybe that destination is retirement, or safety and security. Maybe that destination is guaranteed income for the rest of their lives, or no more risk to market volatility. By understanding the destination they want to get to, you can determine what vehicle helps them get there, and you can explain it in those terms. 

Occasionally you’ll come across people with a background such that they understand the basics of annuities, and you need to explain specifically what’s going to be best in their situation. Or, you’ll come across a highly intellectual, highly analytical type of client. When these things come up, don’t assume that they know everything, but simultaneously don’t speak down to them with how you discuss annuities. You are the expert (if you can’t genuinely say that about yourself either you need more confidence, or you need to study more), and because you’re the expert, you should be the one guiding the conversation, and educating the client. We’re dealing with people’s money and because of that, sometimes things can get “sensitive,” but think of yourself as a financial doctor of sorts, not a general practitioner, but a specialist. A financial doctor who specializes in safety, security, guarantees, income for life, no market risk etc., and carry yourself as that specialist.

Types of Annuities

If you want an explanation of how different annuity products work, click on the types below.

Indexed Annuities

Fixed Annuities

Immediate Annuities

Objection Handling

We often get the statement “Annuities are Complicated.” For more material on how to get past the idea that “Annuities are Complicated” and how you can help others get past that idea too, just go to my “Annuities are Complicated” Blog. 

Remember, annuities are not as complicated as people make them out to be, and they are certainly able to be communicated in a way that clients can understand. Take some time and think about the common things your clients do or have done, and how you can use elements of their world, occupations, careers, and hobbies to explain annuities in their terms. 

Happy Selling!

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This is a photo of rragentsacademy.com founder and CEO Chad Owen

Hello, my name is Chad Owen, The Annuity Sales Coach.

I have written over $269M+ in fixed annuities since 2008. I make all my own calls, run all my appointments, write my own applications, and do all my own follow-up calls. I am the founder and president of Retirement Realized Agents Academy, where I teach agents to do what I do and transform their business.

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