Gun-shy investors? The answer is fixed index annuities

By Ted Williamson

In recent weeks, the financial markets have been flirting with all-time highs as measured by both the Dow and the S&P. I have raised the question before of whether investors are setting themselves up, once again, for major disaster.

We are all familiar with the emotional cycle of investing. The less sophisticated investor tends to get suckered in at, or near, stock market highs. However, this time it appears many investors are aware of the current level of risk and are letting their advisors know how they feel. You know the old saying: "Fool me once shame on me, fool me twice and I retire poor and destitute."

If it is truly an advisor's role to help clients identify and achieve their financial objectives, this reluctance can be easily be overcome by simply asking the right questions and listening to the answers. One of the answers you will receive from the majority of your clients, regardless of how you ask the "risk" question, is "I don't want to lose a dime."

Starting with the dot-com crash and two similar events since, stocks, bonds, mutual funds, variable annuities and diversified portfolios have come to be recognized as risky and not for the faint of heart. Investors during this period have reviewed their risk tolerance and found their losses greatly exceeded what they thought — and were told by their broker and Wall Street — were possible. They do not want to see this happen again and have become gun shy.

It is time for advisors to utilize all the resources they have within their product inventory. This includes insurance products and specifically, fixed index annuities. Why? Because most people planning for retirement want the following:
    1. Guaranteed income for life
    2. No market risk
    3. Predictability
    4. Liquidity
    5. Death benefit
    6. Low cost
Only a fixed index annuity delivers every item on this list. If you aren't familiar with these "new" annuities, then you need to be. They no longer carry the negative attributes of the old equity index annuities which, by the way, no one loathed more than me.

Fixed index annuities have reasonable surrender periods, reasonable surrender charges, competitive income for life riders and carry no market risk, all at a fraction of the cost of variable annuities.

The 2008–2009 market meltdown exposed the risks of the investments peddled by Wall Street. Forty percent losses in 401(k) accounts could not be hidden from the working public. Yet fixed index annuities did not lose a dime on paper, or in reality. In fact, they continued to trudge forward like the proverbial tortoise who eventually won the race with the hare.

Whether your client wishes to start income in three years or 15 years, there is no better way to supplement what Social Security and pension plans do, which is to provide income for life. While it may not be as exciting as trying to guess which way the market moves or as near-sighted as keeping all of your money liquid in case it's needed tomorrow, it is a prudent and safe way to address a retiree's greatest fear: that of outliving their money.