If you walk into the grocery store tomorrow and the cheapest can of coffee is $40 for 12 ounces, you will likely walk out without buying that coffee. However, you might readily pay $4 for a café latte at your local coffeehouse—and that works out to a lot more than $40 when all is said and done.
Closer to home, if you put a sign in your office window tomorrow that says: “Lottery—$100,000 prize, $1000 per ticket but you are guaranteed to win $100,000 prize as long as you keep playing,” you would have people lined up around the block. And yet those same people who would buy that ticket (because the prize would take care of their families) won’t give you a $1,000 premium for a $100,000 whole life policy that is guaranteed to one day pay off as long as they keep playing.
The way the data we receive is framed affects our decision. The right words can remove potential objections and motivate action. For example, to show how safe fixed annuities are, many agents start by bashing the safety of banks. However, my research indicates that it is better to simply say to the consumer: “Fixed annuities are safe; do you know anyone who has ever lost money with a fixed annuity?” The response from almost everyone is “No.” What you have just done is helped them decide for themselves that fixed annuities are safe.
Another example is to ask a prospect, “What are you earning on your certificates of deposit?” rather than first announcing the current annuity yield. By doing this, your annuity’s yield will sound much better after a prospect is reminded what his bank is paying.
The right words can motivate people to act. You are more likely to prompt an action by saying, “Are you going to take a walk after dinner?” rather than “Any plans for the evening?” The question: “Have you guaranteed that your essential retirement expenses are covered?” can be more pithily stated by, “Have you made sure you won’t wind up out on the street?”—and is more likely to get someone to buy an annuity than asking them, “Are you interested in annuities?”
The right words can help people identify an unrealized need. The feature of lifetime income from an annuity may not seem like much of a benefit if a prospect thinks he is going to die next Thursday. Instead of beginning the presentation by proclaiming the wonders of a lifetime income, instead ask, “Did you have any relatives who lived into their nineties?” By introducing the longevity risk this way, the prospect begins to recall every relative who lived a long life. Thus, when you say “This annuity means your income will last as long as you do,” the benefit becomes apparent and real.
Another example of framing is to introduce cognitive dissonance into the equation. You may remember from psychology 101 that this means holding a belief that is contrary to our actions. When our actions and beliefs conflict, a level of discomfort—or dissonance—is created; and the way we typically relieve the discomfort is by changing our actions (which is usually easier than changing our minds).
In the context of an annuity, you would ask the couple across the table, “Would you agree that it is better to earn a little less rather than risk losing your money?” and “Would you agree that it is important to protect at least some assets from the risk of stock market loss?” You would then ask, “Are some of your retirement assets protected from the effects of a prolonged bear market?”
If the couple has said that it is important to protect assets and then is confronted with the self-realization that they have not, then dissonance has been created. This stress can be released by saying, “Were you aware that a fixed annuity can protect your assets from the risk of stock market loss?”
Framing by creating and relieving dissonance is helpful in many areas. Asking a prospect, “Is it important to you to make sure your children won’t have to be responsible for your funeral expenses?” followed by asking whether his funeral expenses are covered may show a need for final expense insurance.
Another example of framing is asking a 35-year-old client whether it is important that his children are able to go to college and exactly how that will be accomplished if he is dead.
A key point is that framing does not make someone do something they shouldn’t do—it isn’t a magic spell. What framing can do is help clients examine data in a new way so that they can make an informed decision.
provides research and consulting services to insurance companies and financial firms in a variety of annuity areas. He also serves as director of research for the National Association for Fixed Annuities and as a research fellow for Webster University. In 1994 he wrote a book to help banks market investment and insurance solutions to their small business clients. In 1996 he produced the first independent hypothetical return monthly publication comparing all index annuities on the market, and in 1997 created the first comprehensive report of index annuity sales, products and trends, "Advantage Index Product Sales & Market Report" (quarterly). His insights on the annuity and retirement income world have appeared in hundreds of publications. In 2006 the National Association of Insurance Commissioners asked him to address their annual meeting and teach regulators the realities of index annuities. He was invited back in 2009 to talk to the NAIC about the effects of aging on senior decision-making. He is a frequent speaker at industry functions. Prior to forming Advantage Compendium, Marrion was president and owner of an NASD broker/dealer with offices in nine states. Previous to that he was vice president of a life insurance company and vice president of an NYSE investment banking firm. He has a BBA from the University of Iowa, an MBA from the University of Missouri, and a doctorate from Webster University. Marrion can be reached at Advantage Compendium, 2187 Butterfield Court, St. Louis, MO 63043. Telephone: 314-255-6531. Email: firstname.lastname@example.org.