What America’s Crisis Means For Annuity Buyers And Sellers
By Thomas F. Streiff
As I write this, a murderous act of war has the financial system in our country in an unprecedented state of concern. Your clients are uncertain what to do. And so are you.
Our system works, and will continue to work. Confidence will come back, maybe quickly, maybe slowly. The American spirit will prevail and prosper. The question that needs to be answered is what your clients will do over the next few months.
I’ve written articles before about the need for planners and agents to support their clients’ retirement needs as well as provide some emotional stability during the tough times. Now I readily admit that the tough times of the past 50 years have been purely economic. In other words, it’s been a recession, or inflation, or a stock market sell-off, or a bond market sell-off.
This time it’s different. This calamity could certainly lead to any or all of those economic outcomes, but the underlying tragic event shakes our very foundation. It causes us to question the stability of our institutions. But it also brings us together, makes us stronger, makes our spirit stronger.
This presents an unprecedented opportunity for the insurance industry to shine–and I think it will. Insurance companies will show their strength, pay their claims, and be here for tomorrow. Your clients will probably be much less inclined to go to riskier investments, especially for their retirement/savings.
I expect that annuities will look pretty attractive, as there will be some level of flight-to-quality.
Does this mean that variable annuities are dead and only fixed annuities will thrive? I don’t think so. There is no question that in the short-term fixed annuities will prosper, and they should. What better place is there for safety, stability, yield, and flexibility all rolled together.
It’s time for all of you who mothballed your fixed annuity products and went the way of the exciting equity products to re-assess your client’s priorities. Dust off fixed annuities and refresh your memory on the number one reason why people buy fixed annuities–safety. Your clients will thank you for the excellent alternative for retirement savings.
As attractive as the fixed annuity will be, don’t give up on variable products, however. Don’t forget all the safety features attached to variable annuities. All those guarantee features that doubters felt had no value suddenly have value.
For instance, we heard that death benefits are of no value, because the stock market always goes up, if we’re a little patient. The problem, of course, is that we don’t know how patient we need to be. The patience required after 1929 was 26 years. But even that’s not the most important point.
The most important point about VA death benefit is that you don’t know when you’ll die. VA death benefits suddenly look very attractive as a way to protect your heirs in uncertain environments.
Additionally, VA living benefits are also very attractive in uncertain times. Living benefits guarantee your client either a certain value at some point in the future or a certain income level.
And speaking of guaranteed income, nothing works as well as annuities (fixed and variable) at making certain that all the money you saved brings about an income stream that you cannot outlive.
So where does all this leave us? Sept. 11, 2001 changed our lives forever. Many things came to an end, and many things get a new start. In pure financial terms, I think it’s the end of feeling that this economy and economic security will grow forever. I think it’s the beginning of looking for guarantees, safety, and stability, while still being able to live the American Dream.
Annuities are a perfect answer–products built for safety, stability, and growth, from an industry that has always been at the bedrock of financial strength. Help your clients understand this. They will have a better retirement and so will you.
Thomas F. Streiff, CFP, CLU, ChFC, CFS, is president of IAC Securities, Inc., Member NASD, SIPC, and Money Matters Exchange, Inc.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.