Over the years, I’ve had some of our best agents try cheap annuity leads from other companies. These are agents who close one out of every three to five of our leads.
Some of them bought 100, 200, even 300 cheaper leads from other companies. They didn’t close a single one.
Same agents, same skills, by their own account. The only thing that changed was the leads.
If you’re shopping for annuity leads, price is the first number you see. But it’s the least useful one. What matters is what it costs you to get a client, and what that client is worth to you. Here’s how to do that math, using what I’ve learned from 16 years and more than 3,000 clients.
Why a $100 Annuity Lead Doesn’t Add Up
Start with a simple question: what does it actually cost to make a scrubbed annuity lead? By scrubbed, I mean a lead our team has checked by hand before it reaches you, to make sure the person is real, isn’t an agent or advisor, meets our age and asset guidelines, and responded to an annuity offer. You can see exactly how we scrub our leads.
About 98% of our leads come from paid advertising, and media is by far our biggest expense. But even if our advertising cost nothing, our leads would still cost more than $100.
Here’s what else goes into every lead:
- The leads we throw away. We pay to generate every response, including perfectly valid ones we don’t sell. Just today, we tossed an 85-year-old with about $100,000. Yesterday, we tossed someone who listed $25,000 to $50,000 to invest, even though they already owned two annuities.
- Our team. Three people scrub leads seven days a week, every day of the year except Christmas. Another manages our client relationships. Five people with good technology working for them is not a small team.
- Merchant fees of about 3% on every transaction.
- Legal. We work with a TCPA attorney.
- Our tech stack. We run on two major platforms that cost about $20,000 a year each, plus a long list of other tools. Those costs have been going up by double digits every year, while our price hasn’t changed.
A few years ago, our costs outside of advertising came to about $70 a lead. Add even a modest $30 profit so we can stay in business, and that’s $100 a lead before we spend a dollar on media. Those costs have only gone up since. So when a company sells annuity leads for less than $100, ask yourself how. They’d need free media, free staff, or both. That doesn’t happen in the real world.
“Even if our advertising were free, our leads would still cost more than $100.”
Look at lead companies as business models. If a lead is priced below what it costs to make, something is being cut. Usually there’s no scrubbing. The lead may be sold to three or four agents. The “lead” may be a purchased list of people who never raised their hand. In some cases, the information is simply fabricated.
The process matters too. How much does the consumer have to read before they become a lead? How many questions do they have to answer? The more work it takes, the more serious the person usually is. Cheap leads almost never ask that much of anyone.
There’s also timing. In our experience, most people who respond to an offer are six months or more from buying. We build our ads and pick our media to find people later in the buying cycle. When we ran radio and TV, a lot of those leads were four to 12 months out. Our targeted digital campaigns are much more likely to reach people who are days or weeks away from a decision. That’s part of what you’re paying for.
Do the Math
Every agent and every market is different, and we’re not an FMO, so we don’t track our clients’ commissions or close rates. But here’s what agents tell us, and it’s enough to do the math.
Some of our clients close one out of every two to five leads. Many close one out of five to 10. Some close one out of 10 to 15.
I’ve used $250,000 in premium as our average case estimate since about 2012. I don’t ask clients about their case sizes, so I can’t say for sure, but with where the markets are today compared with 14 years ago, it’s likely higher now. In wealthier markets like Seattle, San Francisco and Los Angeles, cases often run $600,000 to $800,000. I’ve almost never heard of an agent averaging under $200,000 once they’ve closed a few deals.
One caution about your own numbers: your average case size won’t mean much until you’ve closed three to five cases. One $2 million case will push it way up, and one $50,000 case will drag it down.
Most of our clients sell mainly index annuities. Those typically pay around 10% in total, with about 6% to 8% going to the agent depending on their FMO contract. On a $250,000 case, that’s roughly $15,000 to $20,000.
Here’s what that looks like at our current price of $300 a lead:
| If you close… | Lead cost per sale | Share of a $15,000 to $20,000 commission |
|---|---|---|
| 1 in 5 | $1,500 | About 8% to 10% |
| 1 in 10 | $3,000 | About 15% to 20% |
| 1 in 15 | $4,500 | About 23% to 30% |
Example only, based on our estimates and what agents report. Your results will vary.
Here’s another way to look at it. At $300 a lead and one sale in 10, a sale costs $3,000 in leads. A $50 lead has to close one in 60 just to match that, and you’d be working six times as many leads to get there.
Think about what working those extra leads feels like. Six times as many people blowing you off, telling you to pound sand, or saying they never asked for information. Fax numbers. Wrong numbers. 95-year-olds. People with $5,000, or nothing at all, who want to talk about monthly contributions. That frustration is part of the cost too, and it wears agents down.
Now compare the cheap leads. If you buy 200 leads at $50 and close one, you’ve spent $10,000 for that sale. If you close none, like some of our best agents did, you’ve spent $10,000 for nothing.
What’s a reasonable cost to land a client? I’d say 10% to 40% of what you make on an average case. On a $15,000 commission, that’s $1,500 to $6,000. From what clients tell us, most land well inside that range, and the better you get at working leads, the smaller that percentage becomes.
Some examples:
- A brand-new agent. A high school math teacher in Florida joined our program. He’d been licensed for less than 30 days, had never sold an annuity, and had never been in sales at all. No sales experience, no annuity experience, nothing. Honestly, I thought he’d strike out. He closed about one in 12 or 13 of our leads, wrote a big case and at least broke even.
- A tougher market. Some of our California clients close only one in 15 leads. But at $600,000 to $800,000 a case, on a spend of $4,000 or $5,000, they still earn a very nice return, with a pipeline left to work.
- A long-term client. One agent spent about $13,000 with us last year and made about $170,000 in commissions. His account was off for about three months of the year.
Don’t get so bogged down in the ratios that you miss the point. One appointment with someone who’s qualified, has money and wants an annuity can change your whole year. The question isn’t what the lead costs. It’s whether you’re making money.
The Costs Nobody Puts on the Invoice
The price of a bad lead isn’t the biggest cost. Your time and energy are.
Call someone who never wanted to hear from you, and they may unload on you. That can ruin your whole day, including the calls with real prospects that come after it. Bad leads steal your time, your energy and your optimism about the business. I value my time more than money. If someone steals your time, they’re stealing your money.
“If they steal your time, they’re stealing your money.”
I’ve talked to agents using low-end companies who were lucky to sell one out of every 200 or 300 leads. Honestly, if you don’t have money for marketing, you’d do better to lace up your shoes and knock on doors in a business park. Most business owners have some assets, and it’s just a matter of whether they like you. It’s the hard way to get clients, but it beats burning through 300 leads to maybe sell one.
What You’re Really Comparing
The most important part of lead quality is the message that created the lead.
Our ads are about annuities, and they’re built to attract people who are educated, have higher incomes and actually have money. A lot of the cheaper programs, and many preset appointment programs, never use the word “annuity” at all. They offer something else, retirement information or Social Security help, sometimes even something unrelated, and then call the response an annuity lead. Some use a pre-checked box on an offer for something else entirely.
I learned this one the hard way. About eight or 10 years ago, I ran a Facebook campaign to recruit insurance agents. Every word of the ad was about annuity marketing and growing your annuity production. I spent about $1,500 and got about 50 leads. When my team looked them up, only three had a life and health license. The other 47 were consumers. How? The form was already filled in for them, so people became leads without really knowing what they’d signed up for.
That’s why we control the whole process today. Traffic from our ads comes to our own site and goes through our own questions. We don’t let a media platform decide who becomes a lead.
If the consumer never responded to an annuity message, it’s not an annuity lead. Call it a retirement lead or a Social Security lead.
That matters, because plenty of people with money hate annuities. Bring up the A word, and they run for the hills and think you’re a sleazy car salesman. Trying to sell an annuity to someone who hates annuities is like trying to sell a steak to a vegetarian. When someone responds to an annuity message, they’re already open to it. That’s a much easier conversation.
You can read more about this in the 12 biggest mistakes agents make when buying annuity leads, including what “phone verified” and “appointment” really mean.
Why We’ve Stayed in the Middle on Price
We haven’t always been at $300.
We started out selling $35 co-registration leads from job sites like Monster and CareerBuilder. They didn’t work well for us, and they didn’t work well for our clients. Over the years, we moved to $79, then $125, $150, $200, $250 and, for about the last three years, $300.
None of those increases happened on their own. Each one paid for improvements to our scrubbing process that we couldn’t afford at the lower price. Honestly, you couldn’t pay me enough to run the program the way we did in the early days. Our business is much easier to run when the leads are good, because we rarely hear from clients when things are going well.
“You couldn’t pay me enough to run the program the way we did in the early days.”
When you get bids for anything, it’s smart to toss out the most expensive and the cheapest. The best value is usually in the middle. That’s where we’ve been. Agents who’ve shopped around tell me most of the established scrubbed-lead companies we compete with charge $375 to $600 a lead.
So if $300 sounds expensive, ask what you’re comparing it to. Next to a $50 program, sure. Next to the companies that actually scrub their leads, it’s in the middle. And if you still think it’s too much, try generating scrubbed annuity leads yourself. I’ll be happy to compete with you. It’s not that easy.
How to Judge Any Lead Program
Give it a fair test. Some of our agents have closed the very first lead we sent them. Others didn’t close one until lead five or 10. It depends on your market, your preparation and some luck.
I think 15 to 20 leads is a fair test of any program. A client of mine with a PhD in statistics once told me the N needed to be 25 or 30 to be statistically significant. I told him most agents don’t want to hear they need 30 leads. But by 15 or 20, you should have a sale, or at least proposals out and people waiting on money that isn’t available yet.
When you compare two programs over your first 90 days, track:
- Who the leads are: their investable assets, age, occupation, where they live and any notes provided. Are they educated professionals with money? Look at the addresses, not on one lead, but across a batch. Do most of them live in nice suburbs and established neighborhoods, in homes that look like the people have money? We look at the same thing internally, because it isn’t enough for someone to be interested in annuities. They also have to have enough money to pass suitability and be a good candidate for an annuity, and where they live is part of that picture. More than 90% of our leads include a mailing address, and fewer than 5% of those are PO boxes, so you can usually see where the person lives.
- What happens when you talk: the quality of the conversations, and whether the people are qualified.
- Your results: proposals sent, appointments held and cases closed.
Then divide what you spent by each result. Cost per appointment and cost per sale will tell you far more than cost per lead.
And expect some bad months. When the stock market is strong and people aren’t worried, lead flow drops. In rural areas, the swings are bigger. One of our Midwest clients might get four to six leads a month when we’re busy and one when we’re not. It’s part of the roller coaster. Stay consistent and keep your eye on the goal.
The Payoff Comes Later
The cost of a lead hits on day one. The value of a client doesn’t.
A client may buy another annuity from you down the road, refer friends or, if you’re a fee-based advisor, pay you every year for 20 years. That’s why I’d judge a program by the lifetime value of the clients it brings you, not just the first commission. If you’re not sure how to figure that out, give AI your numbers and ask it to help. That’s what I’ve done with our own business.
Even agents who barely work the leads can come out ahead. Years ago, an established agent in Florida simply mailed our leads an overnight package, sent three or four monthly newsletters and had his assistant make a call. He might close only one or two cases a year. But when those cases are $1 million or $2 million, that’s $60,000 to $120,000 in commission. That pays for a lot of leads. Most of our agents close many more cases than that. Otherwise, they wouldn’t keep working with us.
No lead program is perfect, and ours isn’t either. If you want every lead to be perfect, go sign up with a $50 or $100 program and get a true education. After a few of those experiences, you’ll know exactly what you’re paying for.
More Resources
About Our Lead Program
- Common Questions About Our Annuity Leads: pricing, territories, billing, refunds and how the program works.
- How We Scrub Our Leads: what our team checks before a lead ever reaches you, and why more than half never do.
- Working Our Annuity Leads: the opening script, the overnight package and the follow-up process our best clients use.
- Testimonials From Our Clients: audio testimonials from agents and advisors who use our leads.
- Free Training Video: how top producers work high-quality annuity leads.
- About Us: who we are and how we’ve run the business since 2010.
Articles
- Why Insurance Agents Should Think Twice Before Joining an FMO Lead Program: what to ask before you switch contracts for a lead or appointment program.
- How We Work With FMOs and IMOs, and Why We’re Different: how our partnerships with FMOs and IMOs work, and why we’ve stayed independent.
- Why Agents Leave Our Lead Program, and Why So Many Come Back: why agents quit lead programs, why so many return, and what to ask before you stop.
- Why Good Annuity Leads Look Bad: the five signs that fool agents into giving up on good prospects too soon.
- Why Some Agents Make Money With Annuity Leads and Others Don’t: what our most successful clients do differently.
- The 12 Biggest Mistakes Agents Make When Buying Annuity Leads: what to avoid before you spend a dollar.
- Will Annuity Leads Work in My Area? Rural vs. Big City Markets: how your market changes lead flow, case size and close rates.
- What I’ve Learned Spending Eight Figures Advertising Annuities: 16 years of lessons from the advertising side.
- Founder Interview: The Story Behind TheAnnuityLeads.com: how the company started and why it works the way it does.
- My Clients Were My Greatest Teachers: what 3,000 financial professionals taught me about business, people and myself.
Scott Brooks, MBA, CFP®, is the founder of TheAnnuityLeads.com, which has created leads for insurance agents and financial advisors since 2010.
