Reaching across the aisle

With the election right around the corner, you can’t help but notice all the news and media about the contest. Regardless of your political views, all this hype got me thinking about politics, and it reminded me of a quote I recently heard from former U.S. Comptroller (i.e., the chief accountant), David Walker. He said, “One of the biggest problems with politics is that the right wing and left wing are both far right or far left, and unfortunately the best representation ‘of the people’ is more in the middle. They aren’t far right or far left, but the parties seem to be.” In thinking back over Mr. Walker’s statement, I couldn’t help but notice the similarities to our financial world.

There are many people who are so-called “brokers” who believe stocks and bonds are generally the answer to every client’s investing needs. Then, there are many who offer annuities (and more annuities) and believe these vehicles are the perfect prescription for whatever ails anyone walking through the door. Those who sell annuities are oftentimes selling security and income, while those who are offering stocks and bonds are selling growth and the opportunity for appreciation of their money over time. Generally speaking, each camp often believes the other is wrong or bad. Stock brokers have been known to say, “Oh, no. The last thing you want is an annuity–those things are awful.” Meanwhile an annuity salesperson suggests, “You’ve got to get out of the market–it’s surrounding you with risk when what you need is certainty and security.” Truth be told, each financial vehicle–each tool if you will–has a designed purpose, and when you think about it, a blend of both is oftentimes the answer.

When you’re doing your planning, a portion of the client’s money may need to be safe while another portion may be OK to put at risk. The money that provides the clients income to cover their basic living expenses and lifestyle needs should be predictable, guaranteed and secure–all attributes of a fixed or fixed indexed annuity. No stock market crash, low interest rate environment or any other issue should disrupt a client’s income and or lifestyle in retirement. Income needs to be available and secure when clients need itguaranteed. When doing income planning, find the annuity that will give them the best, highest cash flow possible. That way, the client can put the least amount of money possible to solve their income needs and have more money left over that they can then put in some type of growth account—perhaps even something over on Wall Street.

The growth portion

Once income needs are met with the best possible guaranteed^* income annuity, the client can then go find the best available “growth” account for their money. If they are comfortable with taking risk in their portfolio, they may use a mutual fund, stocks or just have their money professionally managed. If they are not comfortable with risking any losses in their portfolio and would like a more secure option to get a better rate of return on their money, then they can look into other more conservative investment alternatives that are still designed for growth.