Wednesday, June 20, 2018

Take a Second Look at Fixed Index Annuities

If you are a financial professional that typically makes heavy use of stocks and bonds in your clients’ retirement portfolios, this article is for you. Our marketers at Ann Arbor Annuity Exchange spend countless hours trying to get in touch with you to share the fixed index annuity (FIA) story for a portion of your clients’ portfolios where appropriate. Many of you are bombarded with other calls and may have had some experience with fixed annuities in the past, but I implore you to take the time to read through this article and pick up the phone and give us a call.

There are tradeoffs with every single type of product, but for a portion of your clients’ retirement savings or for generating an income stream, FIAs can offer reassurances to you and your clients. I have heard countless times recently that volatility in the market may continue to be the norm. Having downside market protection is a very powerful feature of these products that becomes increasingly important to clients nearing retirement. The tradeoff for FIAs is that the client has the opportunity to receive a portion of the upside of the index in which they are participating in the form of credited interest, but this is balanced by a 0% floor that mitigates downside market risk. If you are trying to reduce market risk while addressing accumulation as well as retirement income, it is the perfect time to take a look at these products more closely.

There has recently been a lot of attention to a white paper that talks about this very topic, titled “Fixed Indexed Annuities: Consider the Alternative”, written by Roger G. Ibbotson, PhD.[1] Roger G. Ibbotson, PhD is the Professor Emeritus of Finance from Yale School of Management. This is among the first research to study the effects of using FIAs as a portion of your retirement portfolio in this way. Ibbotson and a team at Zebra Capital Management ran several different hypothetical scenarios using portfolios with different allocation combinations of stocks, bonds and FIAs over a time period of 1927-2016. The result showed that incorporating FIAs into your clients’ portfolio along with stocks and/or bonds generated an additive effect in many scenarios, on average more than with stocks and bonds alone. Ibbotson urges us to consider other alternatives instead of simply accepting conventional wisdom when looking to reduce longevity and market risk while looking at retirement income solutions.

We’re happy to provide you a copy of this white paper. After reading, contact a marketer here at Ann Arbor Annuity Exchange to discuss how FIAs may fit into your practice.

Dina Mestel | Sales Trainer
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x119 | Dir: 734.786.6119

[1] Ibbotson, PhD, Roger G. “Fixed Indexed Annuities: Consider the Alternative”. Zebra Capital Management, LLC. Jan 2018. Web.

Designed for Financial Professionals.