After Great Recession, Financial Professional Learns How Annuities Help Clients

3 minute read

Financial professional Chris Hernandez is living the dream, but it didn’t start that way. “October 1, 2008, was my first day on the job. I was excited and ready to serve,” says Hernandez of Strategic Capital in Austin, Texas. “I soon realized that I began my career in the worst economic time since the Great Depression. And I failed completely.”

Between October 6 and 10, 2008, the Standard & Poor’s 500 Index fell more than 20% and the country tumbled into the Great Recession. By 2010, Hernandez was ready to quit and find a more stable career.

However, his wife Veronica and a veteran financial professional convinced him to stick with it. He did. And he came through the crash with a clear understanding of how annuities can help clients.

During his first few years in the business, Hernandez worked with many teachers. He found their pensions helped ease their retirement worries. So he decided to model his income planning after the state pension program. “I took this into the private sector where I ask my clients what they need their guaranteed income base to be. Then I use some of their assets to buy annuities,” he says.

For Hernandez, education is step one. He starts by showing his clients exactly how annuities work and the benefits they provide. It’s ground zero for any future discussion on income distribution planning. He explains that if they live within the contract of the annuity it can be a valuable part of their retirement portfolio.

“If someone comes to me with a million dollars, I find out what their essential expenses are. Then we look at additional expenses like trips. And that helps us understand their requirements. Then I build the strategy that fits reality,” explains Hernandez.

Hernandez says that his happiest clients have protected income for life. “Annuities generate guaranteed income to pay for fixed expenses,” he says.

A big part of Hernandez’s success when recommending annuities comes from the early planning phase. At the beginning, he asks about their retirement goals and their philosophies on money. “It’s a key part of the advisory process,” he says, considering there are important differences in what various annuities provide. “I approach prospective clients with the idea that I’ll be their personal CFO and they’ll be the CEO who makes the final decisions.”

The question that comes up over and over again is: “I hear annuities are bad. Why do you use them?” Hernandez will ask his clients why they think annuities are bad. Most say they don’t know. From that point, it’s an educational process of helping them to consider the benefits objectively.

“I ask them to forget the name ‘annuity’ for a minute, so we can discuss what they do and how they work.” Once they learn that an annuity can provide protected lifetime income, many clients change their minds and are open to learning more. Hernandez also provides clients with documentation and articles on annuities. And that includes discussing the negative articles on annuities.

Trust is another important part of his success. A core philosophy at Strategic Capital is something they refer to as ECAT. That stands for education, confidence, action and trust. Hernandez feels that his job is to establish trust, whether clients work with him or not.

Another way he builds that trust is by creating a side-by-side comparison of two different retirement plans. One he calls the “interest-only path.” And the other is a comprehensive income distribution plan with the same assets.

“In our next meeting, I show them what their current path looks like. Their income is always lower than what they expect,” Hernandez says. “So if I can beat that with income guarantees, it is much more relevant than a negative article about annuities.”