Securing Retirement With A Click Of Your Heels

by Frank Jaksa Tailor Made, Sales Consultant

In the cinema classic "The Wizard of Oz," Dorothy didn’t realize where her sparkly ruby slippers could take her. She found out by haphazard chance, at the end of her story, with an accidental click of her heels. In annuity sales, you can’t teleport or practice magic like the characters in Victor Fleming’s epic film – even if you are an agent from Kansas – but you can realize which strategic powers you possess and positively impact your financial future.

This was the encouragement heard from top-producing annuity sales agent Brian Ambrose in his hugely popular break-out session at the October 2010 Learn To Earn conference. Brian advised agents to apply the same expertise, dedication and care they offer their clients’ retirement plans to their own post-career preparation – to click their heels now, rather than later.

After outlining his sales approach for income riders, Brian said he saw a parallel between the benefits of income riders and trail commissions: If agents traded standard up-front commissions on annuity sales for elongated trail commissions, the latter could act as their supplemental retirement income. He broke down the numbers of this rewarding trade-off using the following scenario.

With a typical annuity, the up-front commission is around 7%. Alternately, a trail commission offers agents a smaller commission at the time of sale but allows them to accumulate a valuable 1% trail beginning in the second year. This trail continues for as long as the client’s business is on the carrier’s books – every year at the set trail rate, usually between 0.5% and 1%.

Brian noted, "Without any appreciation on the account value, it would only take about five or six years using a typical trail commission scenario for you to accrue the same dollar amount that the up-front commission would offer." "And if you’re not around, the accumulation is vested to your family," Brian said, sketching out the long-term gains trail commissions ensure.

For example, an agent with an annual production of $5 million could make a gradual shift to accepting trail commissions as a substitute for his or her usual choice of a hefty commission paid at the time of sale. During the first five years of Brian’s retirement strategy, the agent receives $1 million of annual production in trail commissions and selects up-front commissions for the remaining $4 million.

At year six, the agent continues the steady switch to what Brian called Riders Under Management (RUM) by moving $1.5 million of production to the trail side of his or her book of business while keeping the up-front commission on the remaining $3.5 million. This trend continues to the eighth year, where the trail-traditional commission ratio is split half and half. By year 11, $4.5 million of production is on a trail basis.

Referring to his spreadsheet for the presentation, Brian noted that if an agent implemented this strategy today, he or she could be ready for retirement after producing $5 million in business for just 12 years. More specifically, this yields a retirement that looks starkly different than one created by traditional means.

Simply by applying the income riders the agent offers clients to his or her own retirement strategy and gradually transitioning to trail commissions, Brian said his example would leave the agent with a comfortable $125,000 in retirement income, compared to the less than $50,000 received from following a conventional commission plan.

His point was clear: The time to reposition the way you do business is now – especially if your retirement is on the calendar this decade.

To close his fitting use of an archetypal Kansas analogy, Brian told the room of agents at Creative’s headquarters to look at their feet, envision those ruby slippers and realize the power they possess to secure their retirement.

"We all have the choice to follow this same scenario: maintain the lifestyle we have and generate a retirement income that can be 2, 2 ½ or even 3 times greater than what we could do otherwise."

For more information on Brian’s presentation, carriers offering trail commissions and all your strategic planning needs, contact your Creative Marketing Annuity Sales Consultant.  

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11526 – 2011/2/3 | 17511 0341411