We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!


media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us


Close [x]

Industry News


  • Industry Articles (15,702)
  • Industry Conferences (3)
  • Industry Job Openings (9)
  • Negative Media (135)
  • Positive Media (73)
  • Sheryl's Articles (582)
  • Sheryl's Blogs (165)
  • Wink's Articles (221)
  • Wink's Blogs (205)
  • Wink's Press Releases (92)
  • Blog Archives

  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • May 2008
  • February 2008
  • August 2006
  • An Indexed Annuity GLWB is Not…

    November 21, 2010 by Sheryl J. Moore

    By Sheryl Moore

     Nov. 18, 2010 — Recently, a field marketing organization (FMO) published an article on indexed annuity Guaranteed Lifetime Withdrawal Benefits (GLWBs) that raised a few industry folks’ hackles.

    While it was an interesting recruiting attempt and a couple of the issues in this article were valid — the author still has a lot to learn about the benefit that I brought into this market more than four years ago. Here, I provide a quick refresher for those wanting to know more. An indexed annuity GLWB is not:

    A Good Choice for a Client Without a Need for Income
    While the rollup on a GLWB may provide a compelling story now that rates are in the dumps, it is not an excuse to sell income on a legacy sale. Keep in mind that a vast majority of annuity contracts are passed onto clients’ heirs, without money ever being withdrawn. If clients have no intention of ever taking income out of their contract, selling an income feature that will cost them money does not result in a suitable sale.

    A Way to Obtain Principal Protection
    Yes, GLWBs were first introduced to the variable annuity (VA) market to provide principal protection on a risk money product. However, indexed annuities (IAs) already have a principal protection feature; just like fixed annuities. The reason I brought GLWBs into the indexed annuity market was to provide an alternative to annuitization, not for principal protection purposes.

    In 2005, everyone was discussing the trillions of dollars that baby boomers needed to move from an accumulation stage to a retirement income stage. Yet, I couldn’t coerce the independent agent distribution to tell that story. Would you? Income annuities (such as SPIAs or annuitized contracts) eliminate the agent and client’s control over the assets. If the client wants to start/stop income, or change their income amount — tough. The client is stuck with the payment they get and there is nothing anyone can do about it (short of selling the contract to those goofballs with the “It’s my money and I want it now!” commercials). This is why many refer to income annuities or annuitization as “annuicide.”

    To compound the problem, agents are paid 4 percent commission at best on an income annuity sale. Would you sell something that paid less and didn’t allow for flexibility? Enough said. Indexed annuities with GLWBs give the agent the chance to tell the income story and still receive their average 6.35 percent commission.

    The Only Way to Get Income You Cannot Outlive
    That being said, a GLWB is not the only way to obtain an income stream that cannot be outlived. Annuitizing a deferred annuity or purchasing a single premium immediate annuity (SPIA) also provides this option. Notwithstanding, it should also be noted that only 2 percent of clients annuitize their contracts (no doubt that a lack of flexibility has had an impact on this statistic).

    The Best Choice if You Want the Greatest Payout
    Understanding that there are options for guaranteed lifetime income that you cannot outlive, you should know that an income annuity will always provide a greater payout than a GLWB on a fixed or indexed annuity. I know many of you are protesting now, insisting that the rollup on the GLWB has to contribute to a higher payout, right? Wrong. With GLWBs, you are paying for flexibility, something you do not have in an income annuity. For that reason, even a life and 20-year certain payout on an income annuity is more competitive than the annual income on any IA GLWB.

    A Guaranteed Minimum Return
    The rollup (or accumulation benefit) on the GLWB is not comparable to a guaranteed minimum return on the contract. It should never be sold as such, but it rarely ever has been. Our research with consumers has shown that despite the fact that agents are usually clear and accurate in their communication about GLWBs, what the client takes away from the conversation is altogether different than what was communicated to them. Annuities are complex products, folks. You add a GLWB to that conversation and the client’s eyes start to glaze over. What the client does is listen to what the agent says, and relates it to something they are familiar with (a method we all use for cognition of unfamiliar topics). Usually, they compare what they are hearing to the return on a certificate of deposit (CD) or savings account.

    What the agent says: “This annuity features a guaranteed lifetime withdrawal benefit with a guaranteed increase of X percent every year. Now, this benefit provides a higher value to your annuity, which you cannot obtain if you cash-out your annuity, but provides a much greater value to calculate the payments that your lifetime income is based upon.”

    What the client hears: “This annuity features a guarantee of X percent every year.”

    So, be careful not to damn the feature or damn the agent. While the client bears the responsibility for what they purchase, it is still the agent’s job to ensure that they understand what they are purchasing. Tips: compare and contrast the account value of the contract and the GLWB’s benefit base value, ask if the client understands, provide plenty of disclosures, and document, document, document.

    The Same on Every Product
    Every GLWB is different. Some offer rollups with simple interest, when most pay compound interest on their rollups (and no, double-digit simple interest is not always greater than single-digit compound interest). Some GLWBs do not have an explicit cost where others charge as much as 0.95 percent annually. Some have a charge that is calculated on the benefit base value of the GLWB, where a few have charges that are calculated on the lower account value of the contract (remember, charges based on the benefit base always cost more because the Benefit Base is always higher). Some have bonuses on the benefit base value, where most do not. Some have greater withdrawal percentages than others. It is so very important to understand all of the features of the GLWB that you are contemplating selling. (Hint: Make sure you are working with an FMO that understands these features, too. If they think it takes a 15 percent gain on the account value to equal an 8 percent rollup on the GLWB — keep looking! It only takes an 8 percent gain on the account value, plus the cost of the GLWB, to be equivalent to an 8 percent rollup on the GLWB.)

    Elected on 100 Percent of all Indexed Annuity Sales
    GLWBs are right for some clients, not all. This is evident when looking at what percentage of clients elect the benefit on their indexed annuities. Looking at second quarter indexed annuity sales, 56.6 percent of indexed annuities that have a GLWB have clients that have elected the benefit, according to AnnuitySpecs.com’s Sales and Market Report for the second quarter of this year. That is nearly $5 billion in assets that provide flexibility AND the option for guaranteed income that the purchaser cannot outlive — in just one quarter! What’s more, an average of 6.8 percent of the clients that have elected a GLWB on their IA have already turned on their guaranteed lifetime income, almost 5 percent greater than the percentage of clients that annuitize! Looks like we solved that retirement income problem.

    Sheryl Moore is President and CEO of AnnuitySpecs.com, an indexed product resource in Des Moines. She has over a decade of experience working with indexed products, and provides competitive intelligence, market research, product development, consulting services and insight to select financial services companies. She may be reached at sheryl.moore@annuityspecs.com.

    © Entire contents copyright 2010 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

    Originally Posted at AnnuityNews on November 18, 2010 by Sheryl J. Moore.

    Categories: Sheryl's Articles