Page 16 - Investment Advisor March 2022

ANNUITIES UPDATE

By Rod Mims and Allison Bell

Should Your Client Buy a RILA?

Five questions to consider about registered index-linked annuities. Also,
why analysts see RILAs cannibalizing other annuity products.

s your clients near retire-
ment, protecting their money
A from potential losses due to
an uncertain market environment is,
understandably, a priority. But for
some investors, the cost of gaining pro-
tection from market risk may not be
worth the benefit.
If you have clients in this situation,
you may want to discuss a registered
index-linked annuity (RILA). This prod-
uct may be able to fulfill an accumula-
tion need for those clients in retirement
or those who are close to reaching
retirement age, typically within five to
seven years.
RILAs are insurance products that
can be described as a cross between
a fixed indexed annuity and a vari-
able annuity. Like fixed indexed annui-
ties, RILAs provide the opportunity for value for your client isn’t always found • Diversified index options: Indices
growth based on the performance of a in the highest rate. When comparing that perform differently in a vari-
market index. However, RILAs differ rates, it’s important to consider the ety of market environments enable
from indexed annuities in that clients potential of the crediting method as clients to diversify for the highest
do assume a level of market loss risk a whole. potential return.
in exchange for a higher cap on the For example, some RILAs offer • A choice of protection levels:
upside potential. participation rate methods alongside Different ways to help balance risk
That said, a RILA may be a great capped options. While a cap rate allows and reward.
addition to your client’s retirement 100% participation in positive index • Multiple term periods: Both short
portfolio, but with so many new prod- returns up to the cap, a participation and long-term crediting strategies
ucts entering the marketplace, how do rate — sometimes greater than 100% — offer unique benefits.
you choose the right one for your client? works as a multiplier on any increase in • Liquidity features: Free withdraw-
To help narrow the field, answer these the index. als, a death benefit and confinement
five questions. and terminal illness waivers add
2. DOES THE PRODUCT OFFER flexibility to a RILA.
1. WHAT’S THE GROWTH FLEXIBLE FEATURES AND BENEFITS?
OPPORTUNITY FOR MY CLIENT? Life can be unexpected. Just as your 3. WHAT MAKES RILAS STAND OUT?
RILAs commonly feature capped clients’ financial goals can change over While RILA products have similar
indexed interest crediting methods, time, so can their tolerance for risk. designs, some offer features to help
some advertising cap rates — an inter- With so many RILA options available, maximize return potential. Custom
est rate that limits the growth of an it’s important to offer a product that interest crediting methods are a great
indexed annuity — of 200% or more. is flexible enough to adapt to evolving example. They are designed to adapt Adobe Stock
This may look impressive, but the best needs. Here are a few things to look for: to economic conditions, relieving cli-

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