Should IBD Advisors Sell Fixed Indexed Annuities?

Fixed indexed annuity sales of $8.1 billion were the highest first quarter ever. I believe they will continue to grow for these specific reasons:

• Many clients’ perspectives on risk and principal protection are shifting toward a more conservative tone.
• Variable annuity capacity has contracted due to market volatility and the extended low-interest rate environment.
• This makes the principal stability, reasonable growth potential and guaranteed income options offered by FIAs extremely attractive to advisors within IBDs.

Let’s look more closely at safe accumulation. With interest rates historically low and record levels of money on the sidelines, many advisors are concerned about how to put money to work (safely), without the principal risk associated with bond funds if interest rates begin to rise. I recommend that advisors explore FIAs as an option to help client assets grow without market risk to their principal. With returns typically linked to an equity market index, growth potential can be very good relative to other conservative options, and principal is always protected from downside market risk. To gain more insight and training I recommend you work with your firm’s recommended FIA distribution experts, request a few illustrations, and see how these products can perform in up markets and down.

And how about guaranteed income? While most IBD advisors are aware of the income offered by variable annuities with lifetime withdrawal benefit riders, it appears fewer have fully investigated how many FIAs’ optional income riders can generate guaranteed income compared to their variable cousins. Learning the nuances of these customized riders can add great value for your clients and increase sales. Indeed, due to the lack of principal volatility within indexed annuities, many FIA income riders can generate more guaranteed income, allowing advisors to allocate a smaller percentage of a client’s total portfolio to create a greater guaranteed income cushion. 

Don’t view FIAs as strange fruit. With more investigation and a greater appreciation, you will likely find that they are quite appealing to you and your clients. In the current environment, FIAs can be a terrific addition to your portfolio of guaranteed income solutions, and provide an outstanding opportunity to offer your clients new options for both retirement income and principal protection.

¹ LIMRA U.S. Annuities First Quarter 2012 Glimpse, May 2012

Note: All guarantees are based on the claims-paying ability of the insurance company. Although the contract value may be affected by the performance of an index, the contract does not directly or indirectly participate in any stock or equity investment including but not limited to, any dividend payment attributable to any such stock or equity investment.