Not a candidate
Who is not a fixed annuity candidate? In broad terms, if someone has a high risk tolerance and wants the highest return, they would buy an investment – stocks, mutual funds, hard assets. Fixed annuities – whether index or stated rate – are not designed to produce investment-like returns.
At the other extreme there are consumers that have accounts at five different banks to ensure all deposits stay with FDIC coverage limits. There are consumers that would not buy a U.S. Treasury bill because it isn’t FDIC insured. And, let’s face it, there are consumers that are FDIC groupies and will never buy a fixed annuity.
An investor is probably not going to switch from stocks to fixed annuities – unless they should never have been a stock buyer in the first place (see D.). However, investors may use a fixed annuity for their lower-risk money – as an example they may use fixed annuities instead of bonds, but I’ve found it is difficult to break across the “stocks & bonds” mentality that many investors and financial counselors have, even though a strong case can be made to use fixed annuities instead of bond funds.
The ideal candidate is the consumer that will accept the “non-FDIC risk” of the fixed annuity because of the higher potential interest rate, but does not want market risk. This consumer merely needs to be asked which fixed annuity they wish to purchase. The number of strong prospects increases as the spread between bank rates and higher fixed annuity yields – or potential index-linked yields – increases.