The question was: Should I start offering fixed index annuities in my family practice? I’ve stayed away from them due to the regulatory scrutiny they’ve attracted–I didn’t want my customers to think I’m selling something that may be questionable. But now I see that FIAs sold over $25 billion in 2007 and sales are still going pretty strong. Is this the time to rethink this annuity option?

The answer is: There has never been a better time to offer fixed index annuities (FIAs). I mean never. There are several factors that contribute to the substantial opportunity that exists right now.

1. Interest rates on bank certificates of deposit are falling and will likely continue to fall. Clearly the Federal Reserve intends to cut rates further. Bank CDs are now being offered below the inflation rate. Inflation was 4.1% for 2007 and is 4.3% for the last 12 months. Purchasing a CD at 4% or less means that the CD holder is losing money on an inflation-adjusted basis. A carefully selected FIA can give the prospect the opportunity to fight inflation while still protecting his/her principal.

2. Market volatility is continuing. When the seas get rough, the prudent sailor looks for a port. While many investors hope and expect the market to improve with the heavy helping of monetary stimulus from the Federal Reserve, many of these same investors are concerned about building in a level of protection. Investors are worried.

There’s never been a better time to apply the old adage, “hope for the best, but be prepared for the worst.” That is precisely what underpins the use of the FIA. If we knew with a high degree of probability that the markets would do well…then we’d invest directly in the market. Of course, we can’t and don’t know that, so prudence dictates being conservative and protective with at least part of an investor’s retirement funds.

Again, that’s the point of the FIA…to use it for part of the investor’s long-term retirement funds.

3. Continued turmoil in the credit markets has and could continue to negatively impact fixed income securities like bonds and preferred stocks. “Balanced” portfolios with a combination of stocks and bonds have been hit with a double “whammy” during the last six months due to a set of market conditions that have caused both to decline in value. In many cases, the traditional hedge of bonds against stocks has aggravated investors’ losses instead of mitigating them. Including a FIA as part of an overall retirement portfolio that includes stocks and bonds can help provide more stability and provide a “safe” place from which retirement income can be drawn during these tumultuous times for the stock and bond markets.

The key to the successful integration of FIAs is to not be a “hog” about it. Don’t try to put every single person into a FIA. Don’t try to put all of someone’s money into a FIA. In both cases, you will only be asking for trouble.

The best strategy to take advantage of FIAs for you, and for your clients, is to use them within the context of a well thought out retirement plan, and to use them alongside other investment choices, like no-load mutual funds investing in stocks or bonds. Build retirement road maps for your clients that help them achieve their goals. If you don’t know how to build these types of plans, or don’t know where to start, check with annuity marketing organizations that market FIAs to see what type of support they can offer. Support is available to assist you in helping your clients achieve their goals–and in the process, helping you achieve your goals as well.

David D. Holland
CEO and Personal Producer
Retiree Adviser Marketing Corporation
Woodstock, Georgia
www.retireeadviser.com