Whether your focus is life insurance and annuities or mutual funds and stocks, an enormous opportunity to fulfill many of your clients' retirement needs, specifically their retirement income, is quickly gaining traction and picking up speed—the fixed indexed annuity (FIA).
At brass tacks, the typical assumption is that if you're a securities-licensed advisor, you probably sell the occasional variable annuity, or you may have even developed a specialty in the sale of these products. If you're an insurance advisor with a life and health license, on the other hand, fixed annuities have long been equated with your industry. As with your securities-licensed brethren, these annuities' importance and significance to your practice likely varies, but as even my auto insurance agent offers fixed annuities, it's hard to imagine they don't play at least a supporting role in your practice.
Granted, both of these products certainly have their place in some people's portfolios, but with all due respect, the current economic environment just doesn't seem to be ideal for either product. For example, even though variable annuity sales are quite strong, clients and prospects may be bothered by the many big-name carriers that have abandoned the variable annuity business altogether, the rising cost of safety-guaranteeing income riders, and the general stock market volatility. On the other end of the spectrum, the interest rates for fixed annuities are painfully low at a time when investors need as much oomph from their portfolios as they can get without having to sacrifice some element of safety, so the picture on the more conservative, fixed side of things isn't looking all that rosy either.
So what can you, as an insurance or investment professional, do to shield your clients from stock market madness and prevent them from slipping into a stagnant pool of interest rates? How can you set their minds at ease by assuring them that not only will their hard-earned principal remain protected no matter what, but they also have a good chance of growing that initial investment when the stock market performs well? If the client's circumstances warrant it, now's the time to offer a FIA. After all, in today's uneasy economic environment, more consumers are keen to explore their FIA options than ever before. And when you consider their numerous benefits, including flexible structuring, tax-deferred interest crediting, principal protection with the potential for growth, and the option to establish income for life, it's hard to ignore their potential—potential that many consumers are clearly beginning to recognize.
You needn't look hard for evidence of this growing trend. In fact, on top of what you may hear around the water cooler or read in industry magazines, the most recent Beacon Research Fixed Annuity Premium Study revealed that the second quarter saw fixed indexed annuity sales reach their second-highest point yet, ultimately representing more than 50 percent of the market share in the fixed annuity sector. Other Q2 high points for this product include:
- An 8.3 percent increase over first-quarter sales, from $8.2 billion to $8.8 billion, respectively.
- On a year-over-year basis, FIAs gained 4.8 percent over the same period last year, when sales reached $8.4 billion.
- FIA sales are growing quickly this year, as total year-to-date sales reached $17 billion from the $15.9 billion, representing a 6.7 percent increase.
Despite this surge in fixed indexed annuities, the rest of the fixed annuity marketplace fared relatively poorly, with total fixed annuity sales sliding 17.2 percent since the second quarter of 2011, and a year-to-date decline of 13.2 percent
As these data illuminate, there's likely never been a more serendipitous time to move fixed indexed annuities into the forefront of your portfolio of product offerings, as well as into the retirement plans of those of your clients and prospects for whom they are appropriate. As the largest generational cohort in history—the baby boomers—approach retirement in record numbers, and Americans of every generation feel the pinch of economic strain and uncertainty, many investors are looking for ways to guarantee a secure retirement. A well-built FIA can do just that.
