Annuities

Summer’s almost gone … but opportunities remain


Annuities

Throughout the summer, we’ve shared information and ideas on the complacency bubble, opportunity cost (otherwise referred to as cost of waiting), clients in transition, income generation and a plethora of other topics to encourage you to change your behavior, along with your clients’ behavior. We think we’ve presented some compelling ideas and data that have the potential to enhance your financial practice and help you manage client expectations. 

Throughout our dialogue, the market has continued to march upward, unabated by domestic and global issues that have developed. It seems almost unstoppable, but we know it can’t continue this trend indefinitely. Many advisors continue to choose the path of least resistance, and we see huge amounts of inflows continuing weekly into mutual funds, equities and bonds. I encourage you to keep positioning annuities for some of your clients where appropriate. 

Though there are many client scenarios for which you should consider using annuities, here are four prevailing ones that you’ll likely encounter:  

  1. Clients in your book of business over 59 ½ and still working: Discuss in-service withdrawals with them

  2. Clients within five years of retirement who are still fully invested in the market: Think about starting to lock in those returns with an indexed annuity

  3. Clients who have part of the $10 trillion sitting on the sidelines, waiting for advice: Consider alternatives such as single-premium deferred annuities or fixed index annuities

  4. Clients who have portfolios in need of risk reduction: Possibly reduce exposure to interest rate risk with a fixed index annuity

As we ramp back up from summer mode into what is generally the best third of the year, what type of advisor do you want to be? Are you the one who makes it happen, the one who lets it happen, or the one who says, “What happened?”

Let Ash Brokerage be your partner. We’ll help you make it happen.

Annuities

Trust and reputation


Annuities

Professionals have advice for everything, it seems. In the game of golf, they tell you to keep your head down. In real estate, it’s all about “location, location, location.”

In sales, trust and reputation are key to not only creating new relationships and helping new clients, but also in maintaining your current book of business. 

As an insurance producer, how does trust and reputation help you find new clients? Well, primarily by referrals. Successful producers are trusted and own a good reputation, therefore their clients may be more inclined to recommend them to other people.  

But what about your current clients? As their advisor, you can build even more trust, and grow your reputation by making annual policy reviews a must-do in your practice. What are the advantages of annual reviews?

  • Identifying any new client goals 
  • Reviewing beneficiaries to ensure accuracy
  • Looking for life-changing events that may change their needs and/or contract
  • Reviewing performance of current contracts
  • Implementing any reallocations
  • Reviewing lifetime income goals
  • Creating referrals

I am certain there are many more reasons to include annual reviews in your practice, and I would like to include one more: You will likely surpass your clients’ expectations by showing them that you really do care. You will increase your persistency, and will grow your reputation and trust in your community.

Remember, head down in golf, location in real estate, and trust and reputation in sales!

Sales Prospecting

Create a secure income during retirement


Annuities

What is a DIA?

A Delayed or Deferred-Income Annuity is designed to provide a stream of income beginning at a future date. It can help your clients pre-fund their retirement by creating a customized stream of income payments. Clients choose when payments begin, and they may also have the ability to change the date should the need arise.  

Who is best suited for this product?

  • Individuals who are still working and want to create their own “pension-like” retirement income
  • Individuals with money in 401(k) accounts sitting at former employers
  • Retirees looking to protect their retirement plans should they live beyond their life expectancy

How do DIAs work?

DIAs are financial products that help make sure your clients cannot outlive their assets. Your clients can purchase a DIA annuity before or after they retire, and as soon as they reach a pre-determined date, they can receive a guaranteed monthly income for the rest of their life – no matter how long they live.

Your dedicated team at Ash Brokerage is here to assist you, so you should call us today for a DIA illustration! 

DIA Delayed Income Annuity Deferred Income Annuity Annuities

The best ‘worst case’ alternative


Annuities

“The best ‘worst case’ alternative” – that’s how a large variable annuity producer recently described and positioned fixed-index annuities with income riders. It’s not the most ringing of endorsements – a glass-half-empty view – but it’s still extremely significant and impactful. 

I would argue that a more accurate description may be, “the best ‘most probable outcome’ alternative” – a glass-almost-full view.  

Whether you see the glass as half empty or half full, making the right choice between VA and FIA income riders can mean the difference between having a client whose objectives and expectations have been met OR having a client who may have to settle for less than expected – or worse.  

There are three steps to making a good decision:

  1. Collect all of the available facts
  2. Consider possible and probable factors that may influence those facts
  3. Take action … or not (Inaction is also a decision)

Positive or negative, whatever happens after the decision is made won’t change the fact that you made the best possible decision. 

So, if we just look at the income rider portion of the VA or FIA choice, what are the facts you should consider to help your client make a good decision?

  • FIA rollup percentages are routinely greater than those of VAs
  • FIA payout percentages, on the income values, are higher than VAs
  • If a FIA gives your client a higher, guaranteed income value AND pays a greater guaranteed percentage on that value, your client gets greater guaranteed lifetime income from a FIA!   

Next, what other factors should you consider in your decision process?

  • Performance – VAs were designed to be performance engines. With a VA, it is argued that if the returns out-perform the rollups, the client benefits with higher-than-guaranteed income. That is true, but:

    • How likely is that to happen? With an assumed VA fee of 3.5 percent to overcome and a guaranteed rollup of 6 percent, how likely is it that a 9.5 percent return will be realized in a VA to actually increase the guaranteed income payout? Also, even though high returns can occur in a VA in any given year, the total return of the VA must overcome fees and exceed the rollup over the entire deferral period, not just in a given year!

    • The same thing can be said of FIAs. Though it’s less likely to occur in a FIA than in a VA, it does happen. Case in point, I recently received policy statements on two clients whose five-year FIA performance has out-performed their rollup values.  

  • Increasing income opportunity once income is elected – If your client considers income important now, won’t it be even more important in the future – perhaps even critical? Increasingly, FIAs are offering clients income checks that increase and lock in as the selected indexes perform. While VAs may claim to offer opportunity here, evidence that this actually happens is not readily available.

  • Protection of the accumulated account value – While it is critical for our clients to plan, the best-laid plans don’t always work out or reach fruition. If everything goes well (glass half full) and the market cooperates, your choice of either a VA or FIA with an income rider may not be that critical – they’ll both perform, the income riders will kick in and perhaps the VA will even provide a little extra income due to long-term, solid subaccount performance. 

BUT … (glass half empty) if circumstances are such that your client can’t wait the planned number of years to take income, and they need access to their account values NOW, poor market performance in the VA could result in a diminished account value or even one less than the original contract deposit. This would not happen in a FIA.

In summary, a FIA provides greater guaranteed income – that can be structured to increase – as well as an account value protected from negative market performance. A VA could potentially provide a somewhat higher guaranteed income and a fluctuating account value.

So, what’s your decision? A FIA? A VA? A combination of both?

Annuities FIA VA Fixed Variable Annuity

Uncovering New Sales


Annuities

I’m often asked where advisors are finding client funds for fixed and indexed annuities in our current economic environment. In my opinion, most annuity sales are coming from three sources: equities, banks or bonds.

As financial markets reflect increasing volatility, more and more advisors are suggesting that their clients take some of their gains from the last few years off the table. Clients are increasingly open to the idea of protecting their gains by moving some of their equity assets into guaranteed products such as fixed and indexed annuities. Investors who, during the past 14 years, patiently stayed in the market through two severe corrections, are anxious to protect themselves against another potential downturn.

I think banks are the most obvious source of annuity funding. With consumer deposit rates hovering at historic lows for more than five years, clients who’ve been waiting for higher rates are running out of patience. The quest for a higher return without principal fluctuation risk lends itself naturally to fixed and indexed annuities. 

In bonds and bond funds, there’s an entire generation of investors who’ve never experienced a prolonged bear market. As advisors are looking at their clients’ asset allocations, many are looking for bond and bond fund alternatives that are not subject to principal deterioration if rates start to rise. Again, fixed and indexed annuities are often the best solution.

You should take a fresh look at your practice’s current client files. Chances are, annuity sales are waiting to be uncovered. Ash Brokerage is here to help you choose the appropriate fixed or indexed annuity for all your clients’ needs.

Equities Bonds Banks Sales Annuities Fixed Indexed