Since the fixed annuity industry is in the business of adopting useless generic words like “hybrid,” I decided to actually bring wordsmith value to the fixed annuity congregation by introducing a combo word that fits perfectly into the-future-greatest-thing-since-sliced-bread sales pitch. That word is vomitility. Fixed annuities are the antidote for what happens when market volatility creates that uncontrollable drool that is the precursor for the inevitable loss of one’s investment cookies.
Yes, I said vomitility. It’s a perfect blend between vomit and volatility, and something I expect to hear at every bad chicken dinner seminar from Tampa to Portland. Before you start sending the hate emails, let’s break this vomitility thing down for a second. Hybrid smybrid! The new shiny thing for annuity agents is vomitility.
Alright, now let’s get serious. We all remember the whole 2008 market disaster where people got destroyed and vowed on their last grandchild that they were never going to let that happen to their portfolio again. My how time flies, and isn’t it interesting the selective memory of people that are now turning down fixed annuity guarantees because they want more market return. Pigs get slaughtered every single time, and this time will be no different.
Some people love volatility in their portfolio. Those people are called traders…or delusional. Most everyone else in the investment world doesn’t want to throw the dice overhand with a running start. Most rational investors know that a portion of their portfolio should either be guaranteed or not subject to volatile market swings. This is truly where a fixed indexed annuity (FIA) might be a good fit for a portion of the overall allocation. Agents should proudly show the last five-year FIA study of 3.27 percent average annual returns, and yell at the top of their lungs, No downside! No losses! No 2008!
By the way, 3.27 percent with no downside is something that agents should hold as a badge of honor and not sugar coat or juice the numbers like the annuity promoters unfortunately do on the Internet. And for all of those newly created FIA indices with no back testing and only sizzle dreams or “new-ness” attached, agents still should present the 3.27 percent reality, not the hype of the unknown. It’s much better to get a call from a client asking why the returns are higher than planned, than the reverse. There’s no need to hang yourself when FIA returns are acceptable to rational people (and agents), and when the facts of the product are properly and factually presented. It’s all about client (and agent) return expectations at the end of the day.
It’s time for the annuity industry to show people how the world of fixed annuities can prevent vomitility. Trust me, this word is going to stick (no pun intended).