Fixed Indexed Annuity were strong in 2015.

Jim Poolman is interviewed by Peggy Bresnick in this article on LifeHealthPro.com

Mr. Poolman is associated with an industry group that has a mission to educate the general public about the benefits of Fixed Indexed Annuities or FIAs.

In this Q&A session between Ms. Bresnick and Mr. Poolman we learn that the FIA industry has seen growth in 2015 and likely will do the same in 2016.  This is attributed to the baby boomers being conservative and that benefits of FIAs relieve stress and worry.  One feature that helps reduce the stress and worry of baby boomers is lifetime income.  With many of the FIAs available today you can add an income rider**.

An income rider typically allows for a guaranteed roll-up or interest rate on money intended solely for future income.  Essentially, at some point in the future you can tell the insurance company you want to start lifetime income.  The company will calculate your income benefit and start sending you regular income.  Somewhat like a pension, but not a pension.  Depending on the features available the income may continue to a spouse.  With so many income riders on the market, one must be careful to confirm the features work for their situation.

Looking to 2016

Mr. Poolman says that the organization he works for will continue to educate the media, regulators and of course the consumer.  There is misinformation about Fixed Index Annuities that needs to be cleared up.  There is also over use of these products.  There is a line in here somewhere that demonstrates a mix of protecting the consumer and providing benefits. That same line can lead an advisor*** astray by putting too much money into annuity products.

footnotes

** Income riders come in a wide variety of features and fees.  Some are free, some cost money.  Please realize free simply means a lack of transparency on how you are paying for the feature.

*** advisor is general in nature.  To sell an annuity the advisor has an insurance license.

Fixed Index Annuities received good news this week.  The fed raised interest rates by .25%.  The increase might seem tiny at first.  When you begin to understand the underlying structure of fixed index annuities you will realize how important interest rates are.  Fed Rate Increase good for fixed index annuities – would you like to learn about the inner workings of fixed index annuities?

There are two types of annuities

There are variable annuities and fixed annuities.

Fixed Annuities

Fixed annuities guarantee your investment, the actual premium you use to purchase the contract.

Variable Annuities

Variable annuities do not protect the actual principal or premium. Variable annuities have sub-accounts that are in reality mutual funds.  These products also have additional fees that are often hidden inside of the contract. If you own a variable annuity we can help you understand the inner workings.  Some people want to escape from variable annuities, we may be  able to help you do that.

If you have additional questions, please give us a call.  Mention you read about annuities on our iXray Annuities website.

Our phone number is 408-459-8383 or email me rick dot loek aht calrima.com <<trying to keep the bots from scraping my email>>

Read more about the impact of rate changes on fixed annuities

Yes, I said that out-loud and in print! Variable Annuities Suck!  Ken Fisher says, “should not be legal as they currently exist,”  I tend to agree with Mr. Fisher on this.  When people ask me about the Department of Labor (DOL) fiduciary standard that is being suggested I say, “I welcome it.  In doing so, in my opinion, variable annuities will be removed from the market!”  I get an odd look from people.  “Why is that?”, they say.  Because I have not seen one that lives into the fiduciary standard.  If the standard in very simple terms means that you will only and always do what is in your client’s very best interest – variable annuities fail this test.

How can ALL VA’s fail?

How can an entire class of annuities fail the fiduciary test?  Simple, if there is another product that better fits a clients needs, then it *must* be used.

FAIL!

When a variable annuity and a fixed index annuity (FIA) start at the same time and sit for the same period of time (say 10 years) I have yet to see a variable annuity that beats the best FIA.

When talking about all VA’s I’m excluding liquid VA’s on the Registered Investment Platform.  They won’t win many races, but they fill on void.  That void is reduced fee products to store investment assets that simply aren’t needed for income or that want to avoid taxation during your lifetime as well as can be moved in and out of assets (sub-accounts).

I hope to not offend anyone who owns a variable annuity, only those who blindly sell them.  I get it, you were trained to believe they are good.  Time for new training.

If you own a variable annuity and want support in exiting the annuity, call us.  We’ll in vest a little time in you if you’ll in vest a little time too.  Our office number is 408-459-8383.  Ask for Rick and say you want to stress test your variable annuity.

NEVER!

This article attempts to remove the sting (or stink) Ken Fisher is leaving.  I quote, ‘Tarnishing all annuities over some bad sales practices is “ridiculous,”‘ Milevsky says.  Well, how are bad sales practices ever good?  I realize I am throwing the baby out with the bath water.  I have never had a client in the office who was sold a variable annuity who could tell me exactly how it worked, what fees they pay and how the “insurance agent” who sold it to the was paid and likely continues to be paid.  NEVER!

This fixed indexed annuity article is opening the door and some eyes.  However, there seems, from my perspective, much that was left on the editing room floor.

This makes my point, from the article: “But even though FIAs provide buyers with upside potential, these products are not securities, says Stan Haithcock, an adviser in Ponte Verde Beach, Fla., and the author of The Annuity Stanifesto. FIAs are an insurance product. “The unregulated sales pitch that is too often used is ‘market upside with no downside.’ Only half of that is true,” he says. “There is no downside, because it is a fixed annuity.””

Consider there is downside, I’ve seen it.  The reality is if an insurance agent makes a bad suggestion, the client can lose money.  There is risk, always.

Next, How the market index options are purchased and how the company “limits” the return is not how I understand how the products work.  While at a recent training from one of the largest producers of FIAs we learned that the minimal fixed rate interest (fixed account) is either where the contract owner allocates money or they choose the indexing method (or both).

The money that is not placed into the fixed account is not using that guaranteed money.  That guaranteed money is then used to purchase options on the index.  The way the options are purchased puts the burden to fulfill on the index credits on the option provider.  Any implied limits are not done by the carrier but by the system that provides the options & credits.

There are only 100 pennies in a dollar – how you use the pennies, now that’s where you have do your homework.  We’d support you in providing a second opinion, either for a fee or to potentially earn you business.

Read the full USA Today article – don’t believe it is all rosy there is more to learn before you purchase one of these products.