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

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • 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
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Selling Annuities As An Accumulation Strategy

    October 2, 2013 by John Williams CLU,® Regional Sales Director

    John Williams CLU,® Regional Sales Director

    Published in the September 2013 issue of Broker World, reprinted with permission

    Fixed index annuities combine insurance protection with growth potential, but guaranteed lifetime withdrawal benefits may miss the mark

    More than 79 million baby boomers1 are just starting to reach retirement age. Not only are they contemplating the right time to transition out of the workforce, but also they are considering how to stay afloat during their retirement years. Many professionals have already begun addressing a surge of questions from this group about their personal experiences and particular fears. As a trusted advisor, you are poised to profoundly affect the financial decisions they’ll soon make on behalf of themselves and their families.

    Although the stock market may be rebounding, a conservative mindset remains among baby boomers in how to grow their retirement portfolio. Investment portfolios and safe-money accounts alike weren’t spared from the global recession of 2009. Its wake left fearfulness about where and how one safely grows retirement savings. Because of this sensitivity, many baby boomers are considering fixed index annuities to gain an advantage and maintain peace of mind.

    Even within today’s low interest rate environment, a deferred index annuity can be positioned as a viable solution to help a client’s account beat inflation and maintain purchasing power over the next five to 10 years. Prudent brokers are comfortable offering fixed index annuities because they offer a good chance to safely grow a client’s account in today’s interest rate environment.

    Taking the annuity purchaser’s financial goals and  position into account, producers may want to focus on fixed index annuities  with their opportunity of growth in accordance with index gains rather than index annuities that focus on potential future perks with a guaranteed lifetime  ithdrawal benefit (GLWB) feature. If your client is looking for growth opportunities tied to upside performance of an index that reflects gains in the  economy and wishes to maximize that growth, an index annuity without the GLWB feature is likely to be a good solution in this scenario.

    Why Recommend A Fixed Index Annuity?

    Although the average annuity purchaser is getting younger, often investing in a tax-deferred annuity before he or she retires,2 the conservative thinking regarding creating and protecting a retirement nest egg is first and foremost in a purchaser’s mind.

    Recommending an index annuity can help a purchaser whose goal for retirement savings includes accumulating retirement funds without sacrificing principal. Index annuities are a type of “fixed” annuity, which – either deferred or immediate – provides inherent guarantees to a purchaser.

    Fixed annuities are provided by insurance companies, in which the company, or product promisor, offers minimum guarantees plus the  safety of a client’s principal and earnings. Generally, people may buy fixed index annuities not only for their income potential but also for the chance to earn a little more than other safe-money accounts, while simultaneously  protecting their downside.

    More Return For Their Buck

    A recent trend has been to sell index annuities that include a GLWB feature. There is a cost to that feature, and the fee is generally taken from the annuity fund value. When the annuity fund’s growth is reduced by the fee for the GLWB, the potential growth may be unnecessarily dampened, particularly in  this economic environment of low interest rates. Accordingly, ongoing growth is even further dragged down based on the reduced annuity fund value.

    The additional risk, combined with low rate caps, may result in the purchaser of an index annuity with a GLWB not earning returns on  the initial investment much beyond a bank CD. Although annuities and CDs are very different types of products and regulated under different laws, many  purchasers do compare the features of each. In any event, the returns are most  likely lower than an index annuity without the GLWB. Given today’s economic environment combined with GLWB costs and the corresponding reduction in account  value, the question for the annuity customer is if they should purchase a GLWB  product or go with a standard index annuity.

    Growth Over Flexible Income

    If you choose to sell a fixed index annuity with a GLWB rider, it is important to emphasize the flexible lifetime income aspect rather than the guaranteed income account growth percentage. The income account growth only can be accessed if  the client requires lifetime income and otherwise is unavailable for the policyholder.

    For a client to understand the implied return of GLWBs, or the value of the guaranteed roll-up rate and withdrawal combination a GLWB  rider offers, it should first be converted to a number comparable to bank  account interest or returns on a mutual fund. These are numbers that clients tend  to be familiar with and can make it easier for them to compare with other  options. For example, a direct comparison of the GLWB annual growth percentage  of 5 percent and the 1.25 percent annual yield of a five-year bank CD is  misleading.

    A GLWB rider can be appropriate as long as the client  desires and understands both its benefits and costs. Clients should know that  choosing a GLWB feature today means running the risk of losing purchasing power  later. There is a price to pay for access to lifetime income they may never  use, or worse, regret buying later. As a financial consultant, you should be  comfortable discussing all possible outcomes regarding their investment.

    As an alternative, consider positioning a fixed index annuity as an accumulation account that offers the opportunity to earn a little  more, beat inflation and, most important, stay safe. An index annuity can  potentially earn inflation-beating returns over the next five to 10 years and  offer free income for life, in the form of annuitization, should clients  request it. Fixed deferred annuities can be converted to a series of payouts  that can be structured to last a lifetime. Some carriers allow clients to  exchange future income payments for a lump sum payment today. Paying an ongoing  yearly charge for a GLWB feature which promises many similar features may leave  clients questioning the decision to add the feature in the first place.

    Working With Reputable And Principled Carriers

    To beat inflation in today’s current cap rate environment, renewal rate cap integrity is key; in other words, evaluating how the company might treat the  client in future years as it relates to the maximum crediting level to which the account may grow. In any index annuity sale, the customer is at the mercy of the product promisor. A company that decides to pad its own future bottom line does so at the expense of its loyal customers by curtailing the maximum renewal cap rate offered.

    When offering annually renewable fixed index annuities, look for an insurance company with a published renewal cap rate history for  anyone to view. Fully disclosed index annuity renewal rate caps are one way a prospective purchaser can check actual return performance of previously sold  policies. It is important to align yourself with an insurer who acts in the same manner as you – with integrity, full disclosure, highly personalized service and customer satisfaction in mind.

    Frank client discussions  reveal genuine intent regarding your clients’ financial goals, and collaboration is essential to see them succeed. Financial advisors and producers should be aware of both the reasonable benefits a GLWB rider provides and the considerable drawbacks when adding a cost item to an annuity purchase in today’s low interest rate environment. It is your job to frame the potential outcomes in terms clients easily understand to ensure you are setting them up for the long term.

     

    1 Cohn D’Vera, Taylor P. “Baby Boomers Approach Age 65 – Glumly.” Pew Research Center website. Available at http://www.pewsocialtrends.org/2010/12/20/baby-boomers-approach-65-glumly/. Accessed May 16, 2013.

    2 Standard Insurance Company internal data

    – See more at: http://www.standard.com/finpros/newsletter/annuity_news/previous/2013-10/story1.html?utm_source=SilverpopMailing&utm_medium=email&utm_campaign=October%202013%20Annuity%20News%20(1)&utm_content=&spMailingID=7079210&spUserID=MzI4MTE0MDYyMTkS1&spJobID=91109307&spReportId=OTExMDkzMDcS1#sthash.By3uPtpK.dpuf

    Originally Posted at The Standard on October 2013 by John Williams CLU,® Regional Sales Director.

    Categories: Industry Articles
    currency