As I travel and speak with different groups and advisors, I’m pleasantly surprised by their willingness to learn how annuities and life insurance can create true and free liquidity. Too often, clients and their advisors view mutual funds, stocks and bonds as the only source of liquidity in the markets.
I agree those instruments provide liquidity due to the markets on which they are listed. However, market risks and sequencing risks may hinder liquidity when you need to convert the vehicle to cash quickly. And, that is the most worthwhile definition of liquidity – the ability to convert something to cash quickly.
If properly used, life insurance and annuities can help create liquidity as part of an overall asset allocation strategy in just about any portfolio. Let me give you a couple of examples.
I’m happy to show you these numbers and studies in action, so you can see the impact for yourself. But, the bottom line is this: While the specific product may not create immediate liquidity, the proper use of annuities and life insurance can provide free, unrestricted liquidity for many portfolios. The use of annuities and life insurance may create many tax advantages by investing in a different asset allocation focused on long-term capital gains. (Please consult a tax advisor for specific benefits.) Take the time to learn how a small portion of the product allocation makes exponential gains in the performance of the income plan.
Many times, clients want to do a lot with little money. They end up choosing which priority to address. Look at annuities and life insurance as an alternative. They create liquidity within the portfolio if used properly.
Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”
© 2018 Ash Brokerage LLC.