Retirement Planning – The Mantra for Business Today

Retirement planning is one of the hottest selling concepts in life insurance. The COVID pandemic has only made it bigger. Retirement planning will remain as the biggest segment in life insurance sales for many decades. (Also read my other articles in this Blog on retirement planning. Click to read Retirement Planning is not only about Dhaal Roti, Retirement Planning – Catch Them Young, and Retirement Planning – Your Entry Ticket)

Train Yourself to Get the Advantage of the Retirement Planning Boom

Are you prepared to tap this boom? Selling for retirement requires many skills. Financial planning, risk management (both financial risk and life risk), product customization, are some of the skills required. The most important skill is having an ability to ignite the emotion that leads to the close of a sale. Possessing skills and techniques means training. Keep reading this Blog. You will learn how to prepare better. Better at presenting and closing retirement solutions to your customers. Train yourself and skill yourself. Learn the required knowledge to position yourself correctly in the growing market for retirement planning. Take full advantage of the booming market segment.

The Two Stages of Retirement Planning of Individuals

Retirement planning consists of two broad stages: the planning stage and the annuity purchase stage. During the planning stage a contribution is made to an endowment plan. This is done every month or every year for 15 to 20 years to accumulate a corpus. For example investing Rs. 50,000 every year for 20 years may build a corpus of Rs. 20,00,000. The exact amount may vary depending on the endowment product purchased, the age of entry of the policy holder, and the period of making contributions, etc. Rs. 20,00,000 is referred to as the corpus. This corpus is invested in an immediate annuity to get a regular pension.

Options Available in Annuities

There are many options available to the prospect in the purchase of an annuity. The policy holder has the option to commute one-third of the corpus and invest the balance of two-thirds in the annuity. The policy holder also has many options of annuity payments. He or she may choose the annual mode of receiving pension, or the monthly mode. Choice is also available for a guaranteed payment for a fixed term or for life of the annuitant. The annuitant (the person purchasing the annuity) also has the choice to include his or her spouse for a fixed term or to receive the annuity for life. One more choice is available, that is, whether the principal amount is to be returned to the annuitant’s heirs after death of the annuitant and spouse (in case the option chosen is annuity for life for self and spouse).

Choices Do Not Make the Decision Making Process Wholly Rational

The choices available as described above, are all emotional touch points. Do you treat them as such? Do you spend time on the choices by asking the prospect questions that lead him or her to an emotional decision? Or do you just show the options and ask the prospect to choose? Do you focus your discussion on how much pension to plan for? Or do you focus your discussion on the emotional choices in retirement planning? The choices available in an annuity/ pension plan, present you with a wonderful opportunity. The choices allow you to discuss emotional issues. Discussions in the emotional sphere allow prospects to come to an emotionally satisfying decision.

How Emotion Enters the Decision Making – Example 1

Let us take the decision to opt for annuity for life for self and spouse, with return of principal amount to nominees. Some options in an annuity plan do not return the principal amount to the prospect’s nominees. Studies in behavioral sciences have proved that many prospects do not like this idea. They prefer that the principal amount is given to their children, after death. Discuss this option with the prospect by asking the question: Sir would you like to ensure that your children get the principal amount you are investing in this pension? The question will lead to a discussion on bequeathing and the emotion of doing so. Why should the insurance company receive your money after all the hard work you have put in to earn and save? Emotion sells. Logic does not.

How Emotion Enters Decision Making – Example 2

Similarly with all other options. For example, many prospects are secretly evaluating for what is known in academics as “hit by the bus” syndrome. Prospects rarely talk about this. Hit by the bus syndrome means prospects are concerned about dying soon after the annuity starts. Suppose the prospect invests Rs. 50,00,000 in an annuity and dies after three years. During the 3 years, the prospect may have received, depending on the annuity option chosen, Rs. 11,00,000 in all. Prospects are concerned about losing the remaining Rs. 39,00,000.

Logic vs. Emotion

Let us see from a purely logical point of view. The probability of death early during the period of the annuity is smaller than the probability of death in the later years of the period of the annuity. That is, the chances of death increase as you grow older. Prospects do not go by logic. Fear is an emotion. They substitute logic with fear. Many prospects actually convert the lower probability (of dying early in the annuity period) to a higher one. Fear takes over. The question: What if I die within 3 years? plays on their mind. Their logical mind is simply playing tricks with their thought process. The result is a risk aversion for the likely gains in case they live long enough. They do not want to take the risk of buying the annuity, since they believe that they may not live long enough to enjoy it. They believe that the cost of accumulating the corpus was too high compared to the risk of not living long enough. Logic, from mortality tables tells us something different. The chances of death increase as you advance in age. At 60 or 65 you have a greater chance to live than you have at age 80 or 85. People go by emotion, not logic.

The Unspoken Word

Often you may have wondered why an annuity sale does not close. The customer is happy with the monthly pension amount. But does not complete the buying process. There are may be many reasons. If you dig deep enough you will find the reasons are at the emotional level. For example, the unspoken fear that the prospect has of dying early during the annuity period. Or, for example, the plan gives a good pension, but the principal investment goes to the insurance company and not to his or her children. Such fears are never expressed and consequently not known to you. You should work knowing that such emotions exist in the prospect’s mind. You too should never express the fears.

Anticipate the Objections

Not expressing prospect fears does not mean not discussing them. While selling annuities, it is important to keep the unspecified fears of prospects in mind. It is important to raise these issues tactfully by asking questions, by giving examples and by recounting stories, without directly talking of the fears in the prospect’s mind. You have to anticipate these objections and take them into account in your presentation, in advance. The amount of monthly pension is not the sole deciding factor in the decision to buy or not buy an annuity. While the amount of monthly pension is the first step in the decision making process of the prospect, the deciding factors are emotional. Some of the emotional factors in the investment decision making for purchase of an annuity are:

• Will my spouse be able to get the pension after my death?
• What will happen to my investment if I die too early?
• Why should I leave my money to the insurance company?
• Is the pension amount sufficient for a dignified old age?
• Will a guaranteed amount be deposited in my bank account every month?

Develop a Standardized Sales Process

Develop a sales process that helps the prospect to find answers such questions. If you have the right stories, examples, and other illustrative methods, you will reach the prospect’s heart and mind. Take the prospect through a process of self-enlightenment and self-discovery to the questions in his or her mind. Develop a sales process that helps the prospect understand his or her hidden thoughts and thereby his or her needs. Standardize this sales process through training and practice.

Have an Emotional Sales Process

The standardized sales process should be high on the emotions. Selling life insurance is an emotional process. Logic may get the prospect to accept your point of view, but it is emotion that gets the prospect to close the sale. Learn the emotional side of selling. Stay on the prospect’s side.