Understand Your Source of Information
At the most basic level, financial services sales require a couple of things:
- Knowledge: First, some industry and product knowledge is required to explain and sell the product. It is very difficult to have the knowledge to be proficient or expert in all fields, so salespeople tend to focus and specialize. Examples include: mortgage brokers; life insurance sales; financial planners; investment advisors; auto insurance sales; annuity sales; etc.
- Licenses and Appointments: Second, as explained further below, licensing and appointment or “contracting” requirements add to the walls and separation among various financial services silos. Insurance licenses vary by state and coverage, and investment licenses are separate from insurance.
All of this means that a financial advisor is going to discuss products and solutions that they are knowledgeable about and able to sell.
As a result, you need to make sure that what is being recommended or pitched to you is in your best interests rather than the interests of the person selling to you.
Be aware of and understand the incentives behind the information that is being provided to you. This applies whether you are working with a financial advisor from Goldman Sachs or an independent insurance agent.
You need to be especially aware when it comes to annuity products because:
- The different types of annuity products serve very different needs, and purchasing a product that is not suitable for you can be harmful.
- Licensing and contracting are major factors in annuity sales. For example, variable annuities require insurance and securities licenses while indexed annuities require only insurance licenses—someone pitching a certain type of annuity may be doing so because it is the only type of product they are able to sell.
- Annuities are complex and it is very difficult to be proficient across all product types.
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