Technology seems to be one of the only industries that adapts more quickly than the annuity landscape. With countless additions and retractions of benefits, expenses, subaccounts and indexing options, there is only one annuity that offers the most benefits with no annual charge or M&E fee. Below are the seven primary reasons why index annuities have been the top seller since the Q3 of 2014.
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Below you will read about the numerous features and benefits of the current #1 selling index annuity. Keep in mind that with all these features there is no annual fee to the client. My pitch often times includes “index annuities are suited for clients who are risk averse, opposed to fees and in or nearing retirement.” There isn't another annuity on the market place that provides clients with an uncapped indexing strategy, income rider, enhanced death benefit, built in Cost of Living Adjustment (COLA) and bonuses that charges no annual fee.
2. Uncapped Crediting Methods
Banks and independent agents have been selling caps since 1994 when the first index annuity rolled out. Over the last half-decade index annuity carriers have been introducing “uncapped” crediting methods in which client’s have the potential to earn more than the tradition declared or cap rate.
Over the last 3 years index annuities have enjoyed a steady, if not robust, increase in sales as large independent brokers dealers and wire-houses have joined in using them on a large scale. This increase in acceptance of index annuities and sales is largely due, in part, to the use of “uncapped” crediting methods.
Please note that you should know how your “uncapped” crediting method works (spread, volatility control, participation rate, etc.), how long the index you’re using has been in actual existence and how its performed in up/down markets and increasing/decreasing interest rate environments, if applicable. Beware using an "uncapped" strategy as they are not all created equal.
3. Multiple Index Options
The large majority of index annuities sold have used the S&P 500 index as its benchmark index to track and capture gains during the duration of your client’s contract. Simple works but there are a contingent of clients and advisors alike that want more indexing options. This annuity offers crediting methods with the option of using the S&P 500, Russell 2000, Nasdaq-100 and two proprietary indexes. These indexes are available with caps and spreads. The spreads are used on a blended index and volatility controlled index.
4. Upfront Bonus
With this annuity, your clients will receive a 15 percent bonus for income purposes. Keep in mind that most bonuses are used for income purposes but can occasionally be credited to the account (cash) value of the annuity (if so, check the vesting schedule). These bonuses almost always come with an annual fee. The annuity highlighted in this write-up, however, comes with no annual fee and can be used as an enhanced death benefit.
5. Earned Interest Bonus for Income Value
Although not exclusive, an interest credit bonus is another unique feature to this annuity. Simply put every year your account (cash)
value earns interest the income value is credited that interest, plus a 50 percent bonus of that interest. If the client’s account (cash) value earns 4 percent, then your income value is credited 6 percent. If the client’s account value earns 7 percent, then your income value is credited 10.5 percent. Typically, income values are based on a guaranteed roll up percentage (anywhere from 5 percent - 10 percent). This annuity offers a unique strategy to grow your client’s income value, which can also be used as an enhanced death benefit for your client’s beneficiaries.
6. Income Value can be Used as Enhanced Death Benefit
The income value, which is explained above, can be used as an enhanced death benefit. With a 15 percent bonus and 50 percent bonus on interest earned annually the income value will always be larger than the account (cash) value. Client’s beneficiaries can elect
to take the cash value as a lump sum death benefit or the enhanced death benefit over 5 years. The longer payout may provide tax advantages and a reliable source of income for the payout duration. The nice thing is the beneficiary has options. This comes with
no additional fee.
7. Built in Cost of Living Adjustment (COLA)
This annuity can be used for a variety of retirement planning purposes. If used for income a built in COLA will increase your payout every year your annuity earns interest. The increase in your payout will be based on how your income value increases in that year. Regardless of how much money is in your account (cash) value your payout will grow by that percentage increase (even if the account value is at $0). So technically you have an increasing payout on a decreasing asset. That is truly unique.
Continued innovation and superior consumer benefits have allowed for this annuity carrier to be an industry leader for the majority of the last two decades. Providing protection, growth, an estate planning tool and income play all with no fee for both qualified and non-qualified funds is a great retirement tool for the advisor and client alike. This is but one of the insurance carrier’s developments and has been the most used annuity for half of 2014 and all of 2015. I will be interested to see what they have in store for us in 2016.
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