Changes here, changes there, changes, changes everywhere! Just when you think you know which annuity carrier has the best cap rates or the most competitive income rider, everything changes. Every day, producers ask me why the carriers are making these changes. Here’s a brief summary of some important changes:
Over the course of the past several months, the 10-year Treasury yield has continued to decline, falling to nearly 50 percent of what it was one year ago. And recently (on June 1), the yield on the 10-year Treasury fell to a record low—as low as 1.47 percent, which is the first time in history it has ever fallen below 1.5 percent.
When this happens, carriers are forced to strike a delicate balance between maintaining their product pricing while avoiding stripping too much attractiveness from the product or too much commission from the producer. Most carriers are reducing these benefits a little bit on both sides by shaving a small percentage off commission, reducing payout percentages and roll-ups on income riders and, inevitably, reducing caps.
My argument, however, is that even though some of these features and benefits may seem less attractive today than they were a few months ago, there are still a couple of good reasons why these products are highly marketable and beneficial to consumers.
Guarantees. OK, so the guaranteed roll-up (whether it be compounded or simple interest) was just reduced on the income rider you use most often. However, if your clients’ objective truly is to take a lifetime income stream from the asset, you can reassure them that they will still receive guaranteed growth on their income account value with no risk to principal. In times such as these, consumers want and need guarantees, and that is something you bring to the table, no matter the reduction from a previous week or month.
Protection of principal. Let’s get back to the grass roots of what an indexed annuity is all about in the first place: safety of principal and protection from market loss. OK, so caps aren’t 6 percent or 7 percent at present, but you can be certain your clients won’t lose principal due to a decline in the stock market. This is still a prudent solution for that portion of your clients’ assets that they will depend on for income throughout their retirement. That is one feature of the indexed annuity that will stand the test of time.
The last thing you must remember is that changes have not yet been implemented by every carrier out there. Some offerings were conservatively priced to begin with and now stand out above others. So go ahead and roll with those changes, confident in the fact that you are still offering your clients solid retirement solutions.
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- The Trends Issue: When the Going Gets Tough, the Tough Start Selling
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- The One-Two Punch: Annuity Cross-Selling
Trudy Bourque began her career with Asset Marketing Systems in 2003. She works closely with producers at all levels, providing them with the education and targeted positioning strategies. For more information, contact her at (888) 303-8755, ext. 2156.