Fixed Indexed Annuity

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Mar 24, 2009 12:10 am

I try to be open minded. But I do not see the benefit to the client here. Right now I could get a guaranteed 4% annuity for 5 years (NOT indexed), or I could go the indexed route. With a guarantee below 1% at JNL, the max after caps seems likely to be 5-6%, but could easily be 3-5%.............why not save all the trouble and take the 4% fixed?

Mar 24, 2009 12:26 am

maybe your conservative client is feeling a little frisky lately

Mar 24, 2009 7:30 am
newnew:

I try to be open minded. But I do not see the benefit to the client here. Right now I could get a guaranteed 4% annuity for 5 years (NOT indexed), or I could go the indexed route. With a guarantee below 1% at JNL, the max after caps seems likely to be 5-6%, but could easily be 3-5%.............why not save all the trouble and take the 4% fixed?



5 is 25% better than 4 and 6 is 50% better than 4. Show your client both of them and let him/her choose.

Mar 24, 2009 8:00 am

I think over the next 5 years, your performance in  an index annuity will outperform 4% you get in a 5 year fixed annuity.   Even if you think the market goes sideways for next 12 months before serious recovery, you can use a small bonus product (3-5% bonus) and go in the fixed subaccount (~3%) and lock in ~6% in year one.  Then look at where the economy/S&P stand at 1 year anniversary and reallocate it to the Index.  the monthly point to points can get you alot more than 5-6% annually if the markets make a steady climb. 

If you have doubts but think it could be appropriate, do a split ticket with a good EIA and a 5 year fixed annuity.   I haven't sold an EIA in 3 years b/c I had the same doubt when Fixed Annuity rates are over 5% but given they are lower now, I think you can outperform them with an EIA going forward. 

Mar 24, 2009 8:09 am
newnew:

I try to be open minded. But I do not see the benefit to the client here. Right now I could get a guaranteed 4% annuity for 5 years (NOT indexed), or I could go the indexed route. With a guarantee below 1% at JNL, the max after caps seems likely to be 5-6%, but could easily be 3-5%.............why not save all the trouble and take the 4% fixed?

 
 
How can a max seem likely?  Are you trying to say that your crystal ball deems that the client will get 5-6%?  Is there something in the contract that will only give the client 5-6% a year if the index returns 10-15%?
 
Let's assume that it's not possible to get higher than 6%.  With the guaranteed 4%, the client will have $121,665 after 5 years assuming a beginning investment of $100,000.  With the index, assuming 1% the low end and 6% the high end, the client will have between $105,101 and $133,823.  Which is better?  Beats me.  Ask the client whether they want the guarantee or the range.
Mar 24, 2009 9:05 am

anyone know of a fixed or indexed annuity that offers a bonus?

Mar 24, 2009 10:10 am

a max can "seem likely" when the current caps are b/t 5% and 6.25% depending on crediting methods. I was simplifying.

Mar 24, 2009 10:14 am
"Let's assume that it's not possible to get higher than 6%.  With the guaranteed 4%, the client will have $121,665 after 5 years assuming a beginning investment of $100,000.  With the index, assuming 1% the low end and 6% the high end, the client will have between $105,101 and $133,823.  Which is better?  Beats me.  Ask the client whether they want the guarantee or the range. "
 
exactly--conserv clients will not pick the range--they will pick the fixed 122k. IT'S ALL IN HOW IT IS EXPLAINED. But reality is----Take the 122k and if you want a "range", put another small amount is some ETFs. I do not get the FIA. 
Mar 24, 2009 10:16 am

and before anyone says "but the ETFs could go down!", remember I said a SMALL amount---so that after five years even if the market crashes you cannot end up below 105k

Mar 24, 2009 1:09 pm

JFC, why are you trying to talk yourself out of a sale?  Put both options on the table, and let the client decide.  You don't know what is going to outperform, so why bother trying to guess? 

Mar 24, 2009 2:08 pm

oh, Ive got the sale. $ is on the way. I could tell her to buy any annuity and she would-- this is typically the case

Mar 24, 2009 3:37 pm

It is my experience that, even if it's a 'done deal', you can still manage to talk your way out of it.

Mar 27, 2009 11:16 am

My company wholesales fixed and indexed annuities.  PM me and I can have someone contact you that can answer any and all questions.