Looking Into The Annuity Crystal Ball

By Rich Lane

It’s that time of year. We generally start thinking about the past year, and what the coming year may bring both personally and professionally. In the coming months, many factors could change the current financial landscape and have your clients wishing they had a crystal ball to help with investment decisions. The 2016 presidential election, the threat of rising interest rates, and, on the flip side, the potential for deflation — even the pending Department of Labor fiduciary decision — could change the way your clients consider investing.

In today’s economic environment, your clients may feel their investment strategies are in need of a tune-up at the very least, or a complete rethink of their financial plans. Many Americans are still reeling from the financial crisis of 2008 and are looking to recoup lost investments from the market crash. Consider that Americans, after adjusting for inflation, have only recovered 45 percent of their lost pre-recession household net worth, according to the Federal Reserve.

Uncertain times can make even a savvy client rethink a long-term strategy. Although no one has a crystal ball to help with recommendations on the right products for their clients’ needs, they always can be certain there is room for fixed annuities as part of a diversified investment approach. Investors are hungry for stable investment opportunities and a fixed annuity may be their best bet.

Help them balance their portfolios by adding a fixed annuity so that instead of watching stock tickers they can add security to portfolios with principal protection no matter what is happening on Wall Street.

A fixed annuity can provide a balanced solution to any portfolio by offering:

1. Multiple Guarantees — The principal investment and interest rates are guaranteed so clients are secure using the annuity to generate income now or in the future.

2. Liquidity — Annuities offer clients flexibility and access to their funds, including creating an income stream when they need it.

3. Flexibility — Fixed annuities are offered in a breadth of options, allowing clients to structure payouts according to their financial goals and objectives.

4. Accumulation — Purchasers will continue to earn interest, even in a down year. Annuities offer a long-term savings plan for a future income stream.

5. Tax Deferral — Earnings will not be taxed until withdrawals are made or regular distributions start, therefore clients benefit from triple compounding: earning interest on principal, interest on interest, and interest on tax savings.

6. Diversification — Fixed deferred annuities can provide, when needed, a guaranteed income stream of their choosing, with earnings that aren’t taxed until the funds are used. Clients interested in using a fixed annuity as a tool to secure income for retirement can “turn on” a deferred annuity before or after retirement to create a stream of income.

Fixed annuities offer a unique combination of flexibility and guarantees that other financial products may lack. Don’t let erratic market fluctuations and an evolving investment environment affect your clients’ portfolios. We don’t know what’s coming in the near future, but we do know that staying the course with fixed annuities should keep your clients headed in the right direction.

Rich Lane is the director of individual annuity sales and marketing for Standard Insurance Company. He has been in the fixed annuities industry for more than 18 years, with an emphasis on product and distribution development for brokerages, banks and broker/dealers. He may be contacted at [email protected].