Jack Marrion

Noah purchased the first flood insurance policy. Unfortunately, he was unable to collect because the insurance company went under.

The first insurer to issue life income annuities, Mesopotamia Life & Accident Company, was forced into bankruptcy when it wrote a life annuity on Methuselah.

In Roman times the dead were typically buried in low lying areas. However, an enterprising citizen of Herculaneum, who owned a hilltop, started charging people in advance for a higher burial plot that would provide a better view in the afterlife. This advance payment to ensure a premium gravesite at death came to be known as “paying the premium”. 

Since parchment was very expensive in the Middle Ages, insurance policies were hand printed on used parchment that had been washed, but this often left faded lines of the original sentences. Since the new insurance contract words could be seen along with the original text, the page was said to have been “under-written” and this created the process of underwriting a policy.

The origins of the word actuary are based on renaissance insurance carriers hiring soothsayers that acted out the way the proposed insured would die. If the death scene featured an old person the policy was issued.    

“Compliance” comes from the latin word comperiolimus which means “to discover mud.”

A millennium ago the Catholic Church offered a type of variable annuity based on societas sacri officii. These were church offices sold by the Pope that had the authority to do business on behalf of the church. These offices could be very profitable and thus very expensive to purchase, so office seekers would form syndicates and offer people life annuities for their contribution. Many of these paid out a portion of the income received by the church office, so that the income stream was variable.

In the 1690s England authorized the issuance of a million pounds (roughly equal to $500 million today) of life annuities at a payout rate of 14 percent. France and Holland were also big issuers of annuities to fund government expenses.

In 1852 Massachusetts created the first insurance department.

If you take the first letter of the name of every insurance carrier you can create anagrams of every word in the English language.

The idea for a double indemnity life insurance benefit came from the 1944 film Double Indemnity.

The additional forms required by compliance departments for each annuity sale since 2012 has caused so much demand for paper that 2.3 million birds are now homeless because their nesting trees were cut down for pulp.

Ironically, of the forty two insurance companies that have the same company name as a former president, none has ever issued an insurance policy on a former president.  

“FIA” is not an acronym for fixed index annuity, but is derived from the Latin word fiadelisnuntionus which means “believe what the agent tells you.”

If you created a tower containing all of the crediting methods and indices used with fixed index annuities over the last 20 years it would be taller than Mount Everest.

The purchase of a life insurance policy has been clinically proven to protect the owner against cooties, zombies and sorrow. 

The average premium for a life insurance policy that pays a $100 million death benefit if Earth is destroyed by a comet is $52.64.

Annuity is the only word ending in “nnuity.” 

Dear Bob,

Today is the fifth anniversary of the day I retired and, little brother, I suddenly realized that you only have a little over five years to go until you get the gold watch. To help you avoid some of the mistakes I made I’m putting on my big brother cap to give you some advice (and before you roll your eyes, remember, I did talk you out of buying that Pontiac Aztek).

First, try to create a budget of what you think you’ll be spending after you retire (and don’t underestimate medical expenses). Second, get your estimated Social Security benefit from their website. And third, I know you’re not getting a pension, so buy an annuity to cover at least some of the shortfall between what you think your expenses will be and your Social Security income.

My biggest mistake was not buying a fixed annuity to help provide retirement income. I know, you’ve heard me say that with fixed annuities you don’t get high returns—and I won’t take that back, in the good years my investments do a lot better— but what I didn’t count on was the anxiety I created by not buying one.

Back in 2007 my agent suggested using part of my retirement assets to buy a fixed annuity which guaranteed that not only could Barb and I start receiving a regular income when I retired, but that the amount of the income would increase by a guaranteed amount each year until I started taking it. It was a sure thing and buying one meant receiving a dependable income for the rest of our lives. I didn’t buy one.

The reason was I thought I could do better. Granted, my timing stunk because the next year was the crash, but I hung in there and didn’t sell and by the time I retired in 2012 I had more in the investments than I would have had in the annuity. Win for me, right?

Here’s the problem. I’m supposed to withdraw money each year from my investments to use in enjoying my retirement. But I’ve been saving my entire life to make that pile grow… I just can’t bring myself to make it shrink. That advisor we used says we’re supposed to withdraw the same percentage each year for income. I don’t mind taking money out when it’s coming from gains, but the idea of taking money out when there are also losses really upsets me. I’ve gotten to where even the idea of possible future losses is making me pull less out of the pile. It’s having an effect.

We used to go out the last Thursday of every month with another couple for steaks and wine at the Fox & Foie Gras, but I’ve begged off the last few months. I’ve told the other couple we’re dieting, but the real reason is I don’t want to spend the money. Barb’s not happy—she said her vision of retirement wasn’t an ongoing stream of McDonald’s dollar menu selections and nightly television.

 Actually, that’s not the only reason we’ve stayed home. The other couple bought one of those annuities and I’m tired of listening to them talk about how nice it is to get a steady check that won’t go down regardless of what the stock market does, and how using part of their nest egg to buy the annuity was the smartest thing they did. I don’t want to hear that.

 The bottom line is retirement is supposed to be a time where can you finally relax and enjoy life, but because I’m always worrying about not having enough money for tomorrow we’re not enjoying today. Learn from me and buy that fixed annuity now.

 Your Big Brother 

In general, the higher an individual’s IQ, the lesser the odds that the individual will make a bad financial decision. This is not saying that unless you’re Einstein you can’t make good financial decisions, it simply says having greater cognitive powers makes it more likely that the decision will be a good one. However, IQ is not the only factor and may not even be the major factor involved when making decisions.

Noncognitive abilities, also known as personality traits, can be a bigger factor in making wise decisions. During the Great Recession one out of twelve households defaulted on a debt. Why did some default and some didn’t? Education didn’t make a major difference, nor did job loss. The main difference between those that lost their homes or their credit rating was whether they believed they were responsible for their own lives and needed to do what was necessary.

This self-efficacy concept is the degree to which not only do you feel you have control over your own life (which is the related concept of locus of control) but that you’ll do something and take charge. This has nothing to do with one’s education or intelligence level and everything to do with one’s grit. These are the people that don’t throw up their hands when they encounter a problem, but learn how to overcome it. 

There are other aspects of who we are that affect our decisions. A conscientious person tends to be dependable and self-disciplined. If you are highly conscientious your financial decisions will tend to reflect this discipline (paying bills on time and planning for the future). Also, if you are the type of person that remains calm and does not act impulsively when stressed, this indicates great emotional stability. Emotionally stable individuals are less likely to make bad financial decisions. Indeed, people that score low on conscientiousness and emotional stability are five times more likely to suffer long periods of financial distress that those at the opposite end of the scale. It could be said that people that score high on self-efficacy, conscientiousness and emotional stability traits have a winner’s personality.   

Personality traits can lead or limit native intelligence. Financial illiteracy is common and various educational tools are often proposed as the solution, but the tools do not do any good if they remain on the shelf. Hard work maximizes one’s smarts, but all the intelligence in the world is wasted if it isn’t applied. Overall, a person that has strong self-efficacy, is conscientious and emotionally stable is likely to do a good job of planning for retirement, and one that is weak on these traits will not–regardless of their lifetime earnings level and, to an extent, regardless of their level of intelligence. 

There are ways to test for these winning traits, but by the time the typical financial advisor gets involved they are dealing with the financial condition that resulted from the traits and will have little influence on the way the individual makes decisions. However, at this stage the advisor is useful in educating the person about their financial options. Personality traits are forged in childhood and it is at this early stage that the seeds for a successful retirement in that distant future can be planted.

Schools focus on cognitive abilities, but children can be taught to be conscientious. Classes should be taught on the three Rs, but students also need to learn that their grades are something they alone control and how to solve problems rather than quit. And since life is hard, children can be taught coping skills that may temper impetuousness. Perhaps the key lesson to be learned is that noncognitive skills are often the most important elements in lifetime success.  One doesn’t need to be the class genius to succeed, but they will succeed if they practice the personality traits of winners. 

References:
Kuhnen, C. & Melxer, B. 2017. Non-Cognitive Abilities and Financial Delinquency: The Role of Self-Efficacy in Avoiding Financial Distress. NBER Working Paper No. 23028

Parise , G. & K. Peijnenburg. 2017. Understanding the Determinants of Financial Outcomes and Choices: The Role of Noncognitive Abilities. Centre for Economic Policy Research. DP11900

The author would like to thank Jeremy Alexander and Monika Hunsinger of Beacon Research for allowing access to their comprehensive store of annuity sales data and granting permission for a portion of this research to be shared.

Data for this article was drawn from the Beacon Research “Fixed Annuity Premium Study.” The study reports sales data provided quarterly by participating insurance companies as well as results reported in statutory filings and other publicly available sources. Beacon checks this data for general reasonableness, but does not perform independent audits. Beacon uses this data to estimate overall sales and sales by product type.

Beacon Research offers a suite of products to access industry leading annuitydata mined from industry filings, researched from company websites, collected from annuity issuers and rigorously quality-checked by experienced data ana- lysts and issuing companies. Beacon Research provides the most comprehensive and accurate fixed and variable contract and sales data in the industry. They can be contacted at 800-720-3504 or on the web at www.beaconresearch.net.

Overview
For calendar year 2016 estimated U.S. fixed annuity sales were $109.3 billion, up 11.1 percent from 2015. This was a record setting year for fixed annuity sales.  However, sales declined each quarter dropping from $30.0 billion in the first to $23.8 billion in the fourth.

The greatest annual percentage category gain was 18 percent as fixed rate annuity sales, including both market value adjusted (MVA) and non-MVA, increased from $31.3 billion to $36.7 billion. Fixed index annuity sales increased from $54.6 to $60.1 billion. Fixed income–deferred income annuities (DIA) and immediate income annuities–slipped one percent from the previous year to end up at $12.4 billion.

Product Trends
Once again, the Allianz 222 was the top selling fixed annuity in the nation, followed by New York Life Secure Term MVA Fixed Annuity. Four of the top ten selling fixed annuities were fixed index, three were fixed rate (non-MVA) with two fixed rate (MVA) and one fixed income (SPIA) completing the field.

The first quarter of the year is typically the weakest, but, as mentioned, 2016 was the exception. Sales in fixed rate and fixed income annuities slipped each quarter, while fixed index annuity sales bumped up in the second quarter, only to fall back in the rest of the year. Even though this was a record year, fourth quarter fixed annuity sales were 20 percent lower in the fourth quarter than in the first.

Interest Rate Trends
Overall interest rates were lower at the end than at the beginning of the year. The Advantage Insurer Bond Yield Index had the overall average yield on new bonds purchased by insurers at the end of 2015 at 4.74 percent and at 4.28 percent at the end of December, 2016. Going forward, interest rates are muddled as uncertainty about the future direction of the stock market and global economy continues.

When it came to fixed annuity rates the year ended where it began. The average yield on five-year multiple year guaranteed annuities (MYGA) was 1.91 percent in December, 2015, and 1.92 percent in December, 2016; rates fell to a low of 1.5 percent during the summer before rebounding.  

Best Selling Products By Channel
The top 10 selling products in the independent channel space and top nine in the independent broker/dealer channel are all fixed index annuities; in the wirehouse space fixed index annuities had eight out of ten slots. This contrasted sharply with the large regional broker/dealer channel where only one index product cracked the top ten; in this channel fixed rate (MVA) were balanced with fixed income annuity products. In the bank channel, fixed rate annuities had the edge.

Distribution Trends
In 2016 captive and independent agents were responsible for 49.3 percent of total fixed annuity sales, down from over 60 percent five years prior. Also in 2016 banks did 24.8 percent of sales with wirehouses and broker/dealers contributing 24.2 percent—up almost four percent from 2015; direct sales were at 1.7 percent.

Independent agent sales changed a smidgen as more sales were with fixed rate annuities. Fixed index sales slipped as a part of the whole.

The Forecast
My concern last year was that although first quarter sales had been strong, there was confusion caused by the Department of Labor’s ineptly written revision to fiduciary standard rules affecting qualified funds that would cause all annuity sales to fall as the year progressed; that is what happened. 2016 was a record year for fixed annuities, but sales would have been, perhaps, $10 billion higher if not for the disarray caused by trying to interpret what the DOL was saying. 2017 opened with the same DOL fog in place. I won’t even hazard a guess as to how this year will shape up for fixed annuity sales. 

A recent article in Scientific American Mind  (Mar/Apr 2017) says that holding a hot cup of tea or coffee just before meeting someone makes us think better of them, and, by contrast, holding an icy drink causes us to think less kindly. Studies have found that giving someone something warm to hold or raising the temperature in a room makes us friendlier, more compassionate and more caring. And the reverse is true: chilling a person causes them to be less cooperative, more judgmental and meaner.

Our internal thermometer is also adjusted by the attitudes of others.  If people are friendly to us, pay us a compliment and smile, it has the same effect on our internal temperature as getting a hot cup of tea. By the same token, if others are aloof or mean to us we feel a chill (being met with a chilly reception is also felt physically). 

In and of itself this is one of those little science factoids you may read and quickly forget, but often it is helpful to pause for a minute and ask whether the information could possibly help us be more effective in our business. If feeling warmer makes us feel better, perhaps asking the prospective client, “How do you like your coffee?” when they come to your office for that first meeting will start the relationship on the right foot (and notice we didn’t ask them if they wanted coffee, because the response is more likely to be a no).

Speaking of temperature, what is the office thermostat set at? It may seem comfortable to you in your suit coat, but feel cold if you’re wearing a golf shirt. Retirees tend to run colder with age, so it may be a good idea to bump up the thermostat a couple of degrees if you have a session with a septuagenarian in an hour. This raises another question—is your office senior friendly?

When we age, both physical and cognitive abilities tend to decline. We’re all aware that reading glasses become the norm, but it also becomes more difficult to concentrate. On the eyesight battle line, make sure that the room is bright, the chart colors are vivid, and the font is at least 14 point. 

When it comes to aiding concentration with senior clients, meet in a quiet room without music playing, make your key points distinctly, go slow, and schedule the meeting for mid morning. You also want the room to smell neutral, so put a cap on the air fresheners. Speak a little louder than normal. If your normal voice is a deep bass or alto, try to speak in a slightly higher register (aging means we don’t hear low sounds as well).

Another finding that can be put to good use is how consumers are positively influenced. What doesn’t work are celebrity endorsements and colorful brochures showing photos of happy people—consumers find these to be manipulative. What works are recommendations from actual clients and seeing that you have helped similar people with similar needs.

The scene is set: The prospective clients walk into your warm office where they are warmly greeted and comfortably settled in with a hot cup of tea. Instead of product brochures, the binder at their elbow contains testimonials from your clients. After a few minutes to decompress from their commute (and read about how wonderful you are) they are led to the well-lit, quiet conference room where solutions to their needs are presented clearly. An hour later you bid adieu to your new clients. 

Twenty three years ago Target Date Funds (TDFs) were created as a one-stop solution for retirement planning. The story behind TDFs is one of simplicity: Pick the date you will retire and professionals will manage your money with an eye towards that date; the story has been well received. TDFs, like Schwab target date funds for example, are also perceived to be lower risk than regular securities. Consumers didn’t buy TDFs because they expected great performance, but with the expectation that the TDF would help protect them against losses.  

 Fifteen years ago the variable annuity industry introduced a withdrawal benefit that guaranteed a lifetime income and the first GLWB was born. Three years later fixed index annuities began offering GLWBs and soon after GLWBs appeared as riders on a few fixed rate annuities as well. Both TDFs and GLWBs became big hits with consumers. The main reason was simplicity; once you bought the fund or GLWB you didn’t have to mess with it. 

To and Through
The TDF can be managed “to” the target (retirement) date or “through” the target date. The “to” side is based on the belief that the TDF will be liquidated on or around the target date, with the proceeds placed someplace else – such as a retirement income fund – where the money is managed to cope with the systematic withdrawals the retiree will be taking. The “through” TDFs operate under the premise that it will be retained and the retiree will begin taking systematic withdrawals starting around the target date. The GLWB more directly compares to the through TDF because they both are designed to produce retirement income directly while allowing the retiree to maintain control over both the income and access to account value. After a consumer purchases an annuity with a GLWB or a through TDF they could sit back and simply wait to turn on the income spout.

Snowflakes
Individual TDFs and GLWBs are pretty much unique unto themselves. Although the all encompassing theme is there, the individual products, strategies and specifications can be wildly different. Today the typical TDF invests in 17 funds that often include a variety of domestic and international equities, emerging markets funds, commodities and real estate. Along the same individualistic path, variable annuity GLWB specifications differ from each other and often strongly differ from fixed index annuity GLWBs, which also may differ broadly from one another. One needs to pick a TDF that matches their retirement goal and risk philosophy, while the proper GLWB is one where the growth and payout works well for the consumer’s projected income start date.

Similarities and Differences
Both TDFs and GLWBs

• Were specifically designed as retirement solutions.
• Are simple concepts where one can buy it and leave it alone until retirement.
• Are perceived as lower risk than traditional investing.
• Give the retiree control and access to the account.
• Only GLWBs
• Guarantee a minimum growth of future income.
• Guarantee a minimum retirement income.
• Guarantee the retirement income will last a lifetime.
• The income guarantees are backed by the full faith and credit of the insurer.
• Some GLWBs enable you to calculate to the penny the income you will receive at retirement.

Target Date Funds are gaining a big chunk of the retirement fund market because they are a retirement solution the consumer doesn’t have to mess with that they feel provides better protection from market loss. Applying an annuity GLWB concept hits the same higher behavioral buttons as a TDF, but also has guarantees.

The finding is clear-cut. People that buy life annuities live longer than people that don’t. Therefore a theory that buying an annuity will help you live longer is supported…or is it?

Probably not. A more likely reason is that the people buying an income that lasts as long as they live are in good health and come from a long living family. It could also be that people concerned with not running out of money are more risk averse, and the reason life annuity buyers live longer is because risk averse people live longer. Or it could be that since getting a meaningful life annuity income requires a fair amount of premium, more wealthy people buy life annuities than poor people–and maybe wealthy people live longer. Or maybe education is a factor–better educated people buy more annuities, because they are more likely to be aware of them, and better educated people live longer.

We have a case where we believe the conclusion is well supported, but the “why” is not. The reason is that there is more than one possible explanation, or variable, to account for the longer lives of life annuity buyers. These multiple variables, or covariates, make it difficult to determine the real cause of the outcome because they interact.

When there is a news story about some scientific finding, the reporting usually presents it as black and white–”Scientists Find Dodo Bird Eggs Cure Cancer”–but the study’s actual written conclusion tends to be more mealy-mouthed and use a lot of qualifiers because of the possibility that other variables played a part in that cancer cure. This lack of directness and finality can be frustrating when you want a black and white answer, but the reality is most answers are a shade of gray.

For the life annuity question you could try to account for or eliminate (control) other variables. For example, if you looked at groups of only college graduates and only high school graduates–and they both preferred life annuities with equal gusto–then you might be able to rule out education as a variable. Then you might have the subject groups complete a risk aversion test too, and this might rule out risk aversion as a variable. If you can isolate the variables you have a better chance of coming up with the right answer.

How does one deal with this uncertainty? The way I handle it is by accepting that every belief I think is correct today may be proven false tomorrow. It’s kind of like renting your house of beliefs rather than owning it. This makes it easier when a belief you hold dear is overturned, because you simply move to the next rental. It also makes it easier to challenge your own beliefs. I can’t begin to count the number of beliefs I once thought were true that have been replaced by new information. 

This does not mean you blindly accept the belief of the day–I wouldn’t run out and stock up on Dodo eggs–but it also means if you do find credible support for the Dodo egg hypothesis, that you don’t ignore it.  Maybe having scrambled Dodo eggs at Sunday brunch is worth a try.  You simply hold onto to the belief unless and until it is disproved and replaced.

Do Better Informed Investors Always Do Better?  
The answer is no (if you’re betting on horses). The horse sense in New Zealand is that only those horses sold at auction can compete in the high stakes races–so if you’re a breeder and hope to make race money you offer your horse for sale. If you feel your horse will be a winner you can always buy it back, and many owners do. After all, who knows more about a horse’s potential than the owner? But here’s the rub–the owners that buy back their own horses do 30 percent worse in winning future races than an outsider randomly picking a horse. You would think the owners would do much better since they have insider knowledge, but they do far worse. 

The study’s authors are perplexed by this. The only answer they can come up with– and they agree it sounds banal–is that having a little knowledge can be dangerous.¹

Keeping Up With Joneses
A recent study says that consumers engaging in relative instead of absolute consumption can become financially vulnerable due to the neighbor effect. In other words, keeping up with the Joneses by buying a bigger car or taking a trip to the Riviera instead of Florida because the neighbors did can squeeze the pocketbook of people that can’t afford it. But the study also finds that the neighbor effect is a big driver of our economy and would harm the nation if we all stopped trying to one-up one another.²

Be Happier–Eat Your Veggies
A new study concluded that eating eight daily servings of fruits and vegetables makes one happier–a lot happier. Indeed, it created the same degree of happiness as getting a job when you’re unemployed. Over time those that had the recommended daily servings reported they were far happier than those that didn’t.³

Read Your e-Disclosures (or You Might Wind Up in England)
Birdwatchers on England’s east coast were surprised to see a large truck with Turkish license plates coming down their narrow pedestrian lane. Three days earlier the confused truck driver had set his GPS and headed off from Istanbul, failing to notice that the GPS was set to Gibraltar Point, England, and not where he wanted to go which was Gibraltar on the south coast of Spain. A recent study has found most of us simply click through to the next screen when a yes or no question is asked, rather than reading the material. Indeed, they estimate that less than one percent of people read e-license agreements and simply agree to the terms.⁴

Going to Trial? Hope Your Judge’s Football Team Won.
You’re more likely to get a favorable ruling from a judge if his football team won last weekend–and your mortgage application is more likely to get approved as well. If you’re running for office a home team victory just before the election adds an average 1.5 percent to the incumbent’s voter tally.  It also appears that wins create more goodwill than losses give rise to bad will (however, there is a short-lived increase in bar fights when the hometown team loses in an upset). For agents, the takeaway is: If you have a very important Monday sales appointment and the local team was defeated, you might want to reschedule.⁵

How much does $1 million (U.S.) weigh?

• 2.5 pounds in CHF 1,000 Swiss franc notes.
• 4.5 pounds in € 500 Euro notes.
• 22 pounds in U.S. $100 bills.
• 149 pounds in India 1000 rupees paper.
• 36 tons in Venezuela 100 bolivar currency.
• (Derived from The Economist, 24 December, 2016).

References:

1. G. Boyle & G. Ward. 2016. “Do Better Informed Investors Always Do Better?” WP No. 29/2016.

2. R. Barnett et al. 2016. “Do the Joneses Make You Financially Vulnerable?” Drexel University. WP 2016-11.

3. R. Mujcic & A. Oswald. 2016. “Evolution in Well-being and Happiness after Increases in Consumption of Fruit and Vegetables.” Warwick Economics Research Papers 1128.

4. Y. Roth, M. Wanke & I. Erev. 2016. “Click or Skip: The Role of Experience in Easy-Click Checking Decisions.” Forthcoming in the Journal of Consumer Research.

5. R. Janhuba. 2016. “Do Victories and Losses Matter? Effects of Football on Life Satisfaction.” WP 1211-3298. Center for Economic Research and Graduate Education. 

Aging alone causes seniors* to make worse financial decisions even when dementia is not present and the senior is in good health. It isn’t a lack of available education that causes seniors to make less than optimal decisions–which means all the financial education resources in the world won’t eliminate the problem. And the decline is specific to financial decisions–our ability to make optimal financial decisions declines at a faster rate than our ability to make other decisions. For some reason, processing financial problems is in a mental category all by itself. 

These conclusions are from results obtained from the 4000 person Kariv and Silverman study on aging and cognition published last year;¹  I’ve written about this study before because it has strong implications. One is a concern whether seniors will have the mental stamina to continue to be able to capably manage their investment portfolio over the years. A second implication is that financial information needs to be designed and presented in a manner that makes it easier to understand the information–a belief I supported but whose effectiveness is contradicted by new evidence. Another implication is that there is a greater need for financial professionals that will work with seniors to help them avoid bad decisions–however, even here there are stumbling blocks.

The solutions typically proposed to help seniors make decisions are based on the belief in rational economic man–we will make the best decision if given all of the pertinent facts about all of the possible choices. A large part of the senior solution is based on making financial education available. However, the education is compromised if not only does our ability to learn financial concepts decline, but we lose some of the abilities we had. In addition, we typically refuse to accept that our ability to make optimal financial decisions has declined, so we refuse both the education and the advice of financial professionals. This is especially true with the robo-advisors that have been suggested as a cure-all in lowering costs and enhancing financial literacy. But Keane and Thorp² found “online and automated advice, appear to be unattractive to the less sophisticated consumers who could potentially benefit the most.”

The regulators are big fans of more and more disclosure and choices. The problem is aging causes our brains to get overloaded with data more quickly–in one study when the number of choices went from three to twenty the odds of making the correct choice fell by a factor of ten. To fight the overload problem I believed decisions would be aided if the presentation of data was standardized and only the most relevant facts were highlighted…I was wrong. When data delivery is standardized and condensed consumers focus on the unimportant data when making the decision and ignore the important factors such as fees. More choices and more data greatly increase the odds of making a bad decision.   

Since our ability to make the best decisions declines as we age, the indication here is that “set it and forget it” retirement income tools–such as fixed annuities paying a guaranteed income at some point–are more appropriate and more needed from a cognitive view as seniors age.  But this runs into problems too. A key one is people underestimate their life expectancy by five years on average and this translates into lower demand for lifetime income solutions. The other problem relates back to seniors not being as sharp as they were. The Keane and Thorp paper found “stock picking and diversification skills of investors in their sixties and seventies drop off sharply compared with middle age,” but if the seniors won’t accept this fact they will ignore less risky solutions, like annuities, and continue managing their risky investments with less acumen over time (and be more susceptible to scams).     

What we have is a nation where over half of seniors don’t and will never have the needed financial education to make better decisions, coupled with a reality that even the financially literate lose their ability over time to make optimal decisions. What can agents do? Even though it is difficult, work even harder to help consumers understand the value of guaranteed annuity income.

*Those that are sexagenarians and above can be referred to as the elderly, the aged, geriatrics or retirees. I use the term seniors with the belief that a true senior is a person at least a decade older than I am.

Footnotes:
1. S. Kariv & D. Silverman. 2015. Sources of Lower Financial Decision-making Ability at Older Ages.  Michigan Retirement Research Center Working Paper  WP 2015-335
2. Keane, M.P. and S. Thorp, 2016. “Complex Decision Making: The Roles of Cognitive Limitations, Cognitive Decline and Ageing”. The Handbook of Population Ageing.

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Our unique consumer seminar prospecting approach…A proven sales system using seminars…Our proven marketing strategies – we have everything that you need to host a successful seminar event…A market tested lead generation program using seminars…I’ve honed and perfected every aspect of doing seminars and filling the room…Proven methods to attract quality prospects through seminars…How do we increase your business? Delivering proven prospecting seminar systems…We use seminars, putting you in front of quality prospects.

Tell me about your staff.
The reason why our staff is different than in other IMOs? Our staff members are a team…Our staff works harder for our agents than any other organization, guaranteed…Our staff is highly-specialized and extensively trained…Our specialists have more years of experience…We are anchored by a seasoned staff that offers honest insight…Our staff are always striving to provide the highest level of service…What makes us truly special, though, is our staffs’ dedication to agents.

*I recently reviewed several dozen annuity and insurance marketing organization websites; several shared some common points.