Rob Brinkman interviews Ted Williamson about branding trends in the industry and how top advisors are defining themselves.
Rob Brinkman: Good morning, everybody. This is Rob Brinkman, national sales manager with WealthVest. I was going to interview Ted Williamson and do a podcast training for our own internal training here at WealthVest, and then I traveled with him for two days down in Florida.
Ted is our number-one wholesaler. He lives in the Fort Lauderdale area, and has southern Florida. After traveling with him for a couple of days I realized that what he’s doing in the field, not only his own wholesaling practice, but the impact he’s having on the advisors in this area, I thought we should do a podcast for not only internal training but also for advisors to be able to hear because I think that the insight he has, the directions he’s headed in, and like I said, the impact that he’s having on advisors and their own business, is really valuable.
Let me just give you a little bit of background. I’ve known Ted since 1999. We worked together at American Skandia. He headed up the training and spearheaded what, at the time, we called the American Skandia University. Ted graduated from Bucknell and has his Master’s from Harvard. After school he went into the Peace Corps, and as a returned Peace Corps volunteer spent several years teaching English and global culture to Zulu-speaking children in South Africa.
I’m not going to tell you how old he is, but he does compete – and I’ve seen him bike and run, and he competes at a very high level, in the master’s level, in triathlons. I actually went out running with his dogs; he has two Rhodesian Ridgebacks that are absolutely beautiful. Ted, what are they called? What’s their nicknames?
Ted Williamson: African lion hounds.
Rob Brinkman: African lion hounds. So they can’t kill a lion, but they certainly can pin the lion down for the hunters. Is that what they do, kind of like a bird dog?
Ted Williamson: That’s their job. They track the lion until the hunter arrives, and the hunter will finish off the job. But they’re great runners, Rob, as you know.
Rob Brinkman: Yes, they are. They out ran me; that’s for sure. So, Ted, let’s just kick this off. You made a statement while we were riding in the car; you said, “I revamped my practice this summer.” So walk us through what you did and what led you to that.
Ted Williamson: Rob, first of all, thanks for having me this morning. It’s a real pleasure to dialogue with you on this topic. As you know, I’m very passionate about it. What brought this all about was the difficulty that advisors are having right now trying to get clients to do what they need to do as far as planning for or living in retirement and putting their money to work for them.
I was having a lot of frustration, which basically emanated from my advisors with regard to them telling me that their clients didn’t want to do anything in this environment with the volatility and the ups and downs of the market against the backdrop of very, very low interest rates.
So the general attitude here in South Florida is, on the clients’ part, to just wait and see and hopefully the dust would settle sometime soon and they’d put their money to work. Well, that hasn’t happened obviously, and clients and advisors are frustrated.
So I changed my business model. I changed my whole approach to acting as an external partner to my advisors. I began to explore their mindset with regard to whether or not retirement planning was a core part of their practice. That is kind of what we in the 21st century might call a “duh” type of question because virtually every investment advisor out there is going to have the core component of their practice as retirement planning.
So what I’m attempting to do from the onset is to structure the tone and tenor of the dialogue I have with my advisors around that concept – retirement planning and approaching it from the aspect of helping them become what I like to call a retirement planning specialist. When you start the conversation that way and you have a dialogue along those lines, you talk then about the current streams of income that retirees enjoy while in retirement.
And, of course, everyone knows Social Security, a pension, if there is one available. But the challenge is: What do you do with your personal money? When you talk about what Social Security provides, which is income for life; when you talk about what a pension provides, which is also income for life, what product on God’s green earth provides income for life from our perspective? There’s only one, and that is the annuity. So I don’t know if you want to comment on that so far, Rob, but I can certainly continue or if you want to chime in.
Rob Brinkman: Right, one of the things when I heard that, when you said “the annuity,” right. Because there are a lot of people that have different opinions about annuities, and some people have very fond opinions; some can’t stand them. Like anything in life, many times you find out that they’re misinformed; they read some article or overheard someone speak. When I saw you do a public seminar – by the way, Ted, you have how many seminars between October 1st and November 30th? So in a 60-day period of time, how many public seminars are you doing for your advisors?
Ted Williamson: From this point on, Rob, I’ve got 17 seminars scheduled between now and November 17.
Rob Brinkman: Which is just a huge number and it’s not just one advisor; it’s a bunch of different advisors that have adopted your positioning with their clients. So when I was in the seminar, in the back of the room, and there’s 25 people in the room; and you mentioned annuities, there were a lot of very positive responses from the audience.
Where annuities get some negative feedback is from advisors. What is your experience of why advisors have negative opinions of annuities?
Ted Williamson: Well, Rob, it’s funny you say that because I was actually one of those advisors who had that exact mindset. Coming from the securities side of the business, having had a Series 6, a Series 7, so on and so forth for 25-plus years, we always looked at fixed index annuities. At the time we called them equity index annuities and I mean, these things were terrible. Super high surrender charges, super long surrender periods. To get the money out you had to annuitize, and all the things that we would basically speak against, equity index annuities contained.
Unfortunately, even today most registered people have a misconception about fixed index annuities, so we have to approach the whole conversation from a different angle. If you walk into an office labeling yourself as a fixed index annuity pusher, you’re going to be treated as such. My whole approach is to talk about being a retirement planning specialist and the important role that annuities have in that particular conversation.
Every advisor knows the importance of annuities. What they don’t know is what has happened in the evolution on the index side of the equation. So it’s up to us to once again educate and properly train our advisors so they can see the proper positioning of the indexed annuity. So rather than get railroaded down the path of index annuities being this or that, approach it from the importance of annuities in a retirement planning scenario, then talk about the evolution of the index annuity.
Something I learned from Wade a long time ago, which I tend to use almost on a weekly basis now is when someone begins to vent against index annuities, just let them go. Never get defensive; never get hostile. Let them put on the table everything they dislike about index annuities and then when they’re done, ask if there’s anything else and then agree with them. Simply agree with them with regard to everything they’re saying applying to the old version of index annuities. And then ask the very important question of whether or not they are aware of the new hybrid annuity or fixed index annuity. And invariably, Rob, they’re going to say “No.”
Now we can start a whole new, fresh conversation and you’ve got a leg to stand on with regard to making them aware of the fact that there is a, perhaps new and better mousetrap in town that is providing the market with what they’re asking for, which is little or no risk whatsoever at a reasonable cost with an income flow that cannot be outlived, that does not require annuitization.
I’ve been having great success with that approach rather than walking in and saying, “I’m the new index annuity guy on the block. Let’s have a conversation.”
Rob Brinkman: What’s interesting, I’ll pull out two points there. One, you and I have both been in the business a long time. You’ve been in 29 years; I’ve been in about 24, and we both remember the days back in the late ‘80s, early ‘90s, when variable annuities were just absolutely hated. They thought they were junk and a waste of time.
I remember at American Skandia, when I was there a little bit before you, we brought out the very first bonus variable annuity where you could get a bonus inside the contract. We were just regaled against. People said, “This is rebating. You guys are going to go out of business,” and so now, try to find an insurance company that does not offer a bonus annuity.
What happens is that over time things improve and they become more consumer friendly; and this is leading to your point about the newer version of the fixed index annuity.
The second thing is, and I want to go all the way back to your point, and maybe you can dive into it a little bit deeper, because it really resonated with the crowd at the seminar – that is that an insurance company is the only entity outside of Social Security or a company pension that can give you a guaranteed lifetime income. I know a lot of people are fascinated with these index CDs, which function mechanically very similar to an index annuity, but there are two big differences.
One, is you have to pay tax along the way, which is kind of a hassle. But the other one is a bank or whatever underlying institution that’s running that product; they can’t guarantee a lifetime income, only an insurance company can do it. So by moving it to a generic space, which is what you do – you talk about an annuity in an insurance company and by talking about it generically, it allows you to get on a new platform to have a dialogue with somebody.
I remember when I was in retail back in the early ‘80s when I was with Edward Jones, people would say, “I’m going to the bank,” or they would complain and say, “Yeah, the IRAs are really paying low.” And I said, “What do you mean the IRAs are really paying low?” “Well, I went to the bank this morning to renew my IRA and it’s really paying low.”
And I said, “Well, wait a minute. An IRA is nothing but a shoebox. What you put inside the IRA, you don’t have to put a bank CD. You could put a bunch of other different things in there.” They just looked at me like I had four heads. They just had no clue. So they just always attached a bank CD with an IRA. They thought it was one and the same. I think you have a similar thing going on with annuities and insurance companies. Can you just expand on that a little bit?
Ted Williamson: Yeah, Rob, I would agree. Once again, it’s all a matter of having a dialogue and bringing either the advisor or the client along with you. You don’t want to push against them; you don’t want to pull them too hard, but just dialogue along with them.
As you know, Rob, I like to use the analogy of the three-legged stool. I like to talk about retirement being a situation where you’re trying to construct as many lifelong income flows as you possibly can.
Once again, you ask questions that the audience can easily answer to bring them along with you. So if you draw this three-legged stool on the chart, you then talk about income flows that they are aware of, one being Social Security, of course. You ask the audience, what’s an income flow that you can enjoy once you’re in retirement? Everyone knows the answer, so you write Social Security for one leg.
The next leg, of course, you ask the question and the answer comes up pension. Then the third leg, you’re going to get a number of different answers – personal savings, what you do with your own personal money – and that is the leg that we really want to construct. The label that I like to use is personal pension plan, constructing or designing your own personal pension plan, which is ostensibly going to do the same thing that Social Security does and what a corporate pension might do, which is insure lifelong income. And now the client gets it.
Going back to what you just mentioned, Rob. With regard to one’s qualified money, people need to understand that an IRA vehicle is nothing more than a bowl into which you can put anything you wish, but any credible retirement program has to have two entities. One is an accumulation program, and the other is a lifelong distribution program.
So when you get people understanding the fact that the income has to last a lifetime, you basically back into the annuity being the only investment vehicle that’s going to provide you with that essential component of lifelong income. So that’s one way of getting them on the right track with regard to what an annuity can do.
And then, of course, from there we talk about the different types of annuities, not spending too much time on DAs. But, once again, given where we are with regard to the market volatility and the low interest rate environment, it’s very, very easy to talk about the risk and cost associated with variable annuities as opposed to fixed index, and people see the fit. They see the fit, they see the function, they see the need; they have the need, and basically, it’s a very, very fine platform from which to present the whole fixed index annuity concept.
Rob Brinkman: Right. I’m going to make a couple of comments, and then I want to circle back to this retirement planning, retirement income planning, or retirement planning specialist, and maybe we can wrap up with your perspective of that, with the success your advisors are having.
When we look at the landscape of financial services; and I’m big on positioning and elevator speeches. Elevator speeches are kind of a nickname for how you describe what you do in 30 seconds. It’s amazing, I still see it. I’ll be at a dinner party or out with some golf friends and I’ll hear a friend of mine who’s in the investment business on the retail side. So you’ll ask him, “So, what do you do?” He’ll say, “Well, I’m a financial planner or I’m an investment advisor or I’m a financial advisor.” Number one, that’s just very cold. It really doesn’t describe anything.
Number two, if that person has had negative experiences with a financial advisor in the past, automatically the wall goes up, instead of that person saying what they do. What the actually do for people is change their lives financially.
What I like on the tack that you’re on is for this person in the business to say, “Well, I help people live a comfortable retirement,” or “I help people get a guaranteed income so they can live the retirement they work for.” Anything that’s descriptive to where that person will say, “Well, gee, how in the world do you do that,” and then the dialogue begins with them.
But before I can launch this back to you, one of the things that we just need to remember is here we are in 2011. Back in 2005 and 2006, when you looked at John Smith, who was let’s call him 55 years old; at that time John Smith was looking at age 60 or 62, and he knew the day he was going to retire. He had it all mapped out.
He knew what his balance was in his 401(k) and his savings and what his house was worth. He knew how many months he was going to be able to go to Florida in the winter and play golf. He knew how many times he was going to be able to travel and vacation each year. He knew all that. And then ’07, ’08 comes along and changes his world. And now John Smith, here he is in 2011. He doesn’t know when he’s going to retire, so he’s looking for certainty.
Last week I was fortunate enough to meet with one of the top advisors in the country. This man manages over [$3.. audio skips 19:29.3] billion dollars in private assets with private clients and he has a lot of $10 and $20 million clients.
We were talking about the fixed index annuity and how it fits in the practice. I had used the term the middle-class millionaire. There are a lot of middle-call millionaires, kind of like this John Smith, that need that guaranteed check. He reached his hand out and he put it on my elbow and he said, “Rob, I want you to understand something. My $20 million clients, they’re looking for guaranteed income, too.”
I was just really startled by that because you’d think somebody with that much money that they really don’t have to worry about it. But the economy we live in, it really is having an impact on people at all levels of the socioeconomic ladder.
And so, now I’ll muffle my soapbox, I’m going to throw it back to you, Ted, because I’m supposed to be interviewing you, but this concept of how a financial advisor can define himself and how you’re helping him do that with this retirement income planning – can you walk through the reception that some of these advisors, the light that’s gone off for them, and how they’re actually taking their practice in the direction they’re taking their practice?
Ted Williamson: Well, Rob, as I mentioned earlier, it’s such a frustrating time for both advisors and clients. If you can show them how to create a win for their clients and also a win for themselves compensation-wise, they will be very, very receptive to it. But we first have to get them over the obstacle of, once again, their preconceived notion of what a fixed index annuity is.
But going back to the story that you just shared with regard to even millionaires wanting guaranteed income, I ran into a situation two weeks ago with one of my advisors calling upon a client who actually had between $15 and 18 million dollars in investable assets. The advisor and I had discussed methodically how we were going to approach this client, what we thought would be most appropriate.
We’re looking at one of our carriers who provides an instant bonus, an attractive bonus, for death benefit purposes, which we were going to present to the client as a wealth transfer type of solution. He looked into it and he was somewhat receptive to it. He basically asked the question what else did we have. We had also discussed an income for life situation, which I was not that excited about because my impression was a guy with multiple millions, the last thing he really needs is income.
The reality is, the client was much more interested in a guaranteed income flow rather than the wealth transfer, and I was very, very surprised and shocked by this. But to your point, everyone is interested in lifelong income because the alternatives are so slim in today’s marketplace. I mean, what are the choices? Even tax-free bonds right now carry an incredible risk that people who do a little bit of homework are beginning now to shy away from.
So, once again, the annuity is an answer for income sooner, income later, income never, the wealth transfer, but also for wealthy people who we, perhaps, initially would not think would be interested. So we’ve got so many different situations that our product inventory can lend itself to.
Rob Brinkman: Great, thanks for sharing that. We’re a solid 22 minutes into this. I think it’s been a great dialogue; a great display of how you’re working and you sharing the information.
Why don’t we go ahead and wrap it up, Ted. I really appreciate your time on this, and I think this is valuable for everybody. Alright, everybody thanks so much for listening.
Ted Williamson: Thanks a lot. Let’s do it again. Thanks.
Rob Brinkman: You bet.