Clients Choice of Crediting Methods, which is Better You Think?

[Justin Bilyj]

I am signing a client up for an annuity and its main two crediting options are (S&P for both options):

1 year Monthly Averaging with a PR of 95%, fee is .35% (worst case is 50% PR and 6% fee) with a 2% bonus on premiums year 1-5

or

1 year pt to pt with monthly cap of 2.75% no fee (worst case is 1% cap) with a 2% bonus on premiums year 1-5

she is looking for best accumulation option. Which would you choose? If you anticipated a bear market to come would you choose another option?
Thank you

 

[GreenSky]

I'd put her in a 5 year MYGA at 3%.

Either way, I'd make my first phone call to Tahoe Ray for help.

Rick

 

[DHK]

Why not do 50% into one and 50% into the other?

The monthly averaging option would be the "tactical" option, locking in gains every month, but paying them out after each segment period (1 year).

The annual point-to-point would be the "strategic" option because of the longer time frame. This strategy has more of a risk of 0%, than the monthly averaging option.

Combine the two and one will always win out over the other... but by using both, you reduce the chance of having no or only 1% returns on the entire balance.

Remember, there will ALWAYS be volatility in whatever indexing option you choose. Help the client capture as much upside volatility through the strategies as possible.

Just my thoughts.

 

[Justin Bilyj]

Thanks Dave for that, I hope Tyler or Ray chime in...

 

[scagnt83]

So your selling a NWL Ultra Value I take it?


Good product. I like it.


The 95%PR has extremely strong historicals.

Personally I lean more towards a 75/25 mix on this one (75 to the PR).

2.75% is good for a monthly cap. But the midpoint historicals do not compete with the 95% PR.


Check out the Global Outlook from them too. It is a much lower PR. But it has strong historicals even at the 50% PR.
(S&P is 75% PR on the global lookback)

 

[Tahoe Ray]

I am signing a client up for an annuity and its main two crediting options are (S&P for both options):

1 year Monthly Averaging with a PR of 95%, fee is .35% (worst case is 50% PR and 6% fee) with a 2% bonus on premiums year 1-5

or

1 year pt to pt with monthly cap of 2.75% no fee (worst case is 1% cap) with a 2% bonus on premiums year 1-5

she is looking for best accumulation option. Which would you choose? If you anticipated a bear market to come would you choose another option?
Thank you

Don't you love gold? GA has that as a p2p GLD option...

That being said, I'm not a huge fan of FIAs for accumulation. I do them mainly when lifetime income is involved and this sounds like an FPDA client (since you're referencing a bonus after year 1).

A 1yr monthly avg w/ a 95% PR is solid (especially w/ a spread that low) but I'm still don't love many of these strategies because of the insurance company's ability to go to the max (50% PR w/ a 6% spread). If they were to get bought out or hit hard times...

I'm don't love 1yr monthly p2p strategies. A bad month can wreck your crediting.

I like DHK's approach of spreading around the risk. Why is this client focused on accumulation? What's her end game?

 

[Justin Bilyj]

She's young just starting her IRA, likes the indexed option and shudders about losing her principal (she knows the markets are rigged)...

 

[Tahoe Ray]

She's young just starting her IRA, likes the indexed option and shudders about losing her principal (she knows the markets are rigged)...

If that is her belief, then I would say that there is no such thing as a safe investment (at least one with upside or unless you assume that the carriers can "game" the market).

Tell her to earn more money instead. Invest in herself and in furthering her career. Take a class, learn a skill, advance in her profession. Buy land, invest in hard assets, and make sure that her assets as safe from taxation (current and future) as possible.

This is not what I necessarily believe, just what I would look to do if I were in her position with a belief that the markets are rigged.

Why play a game that she doesn't think she can win?

 

[KRobby]

I am signing a client up for an annuity and its main two crediting options are (S&P for both options)

So it's a done deal? You just have to show up next time and present your idea?
Don't forget those apps

Or are you probing for closing techs to close the ticket?

She's needs an answer to the accumulation question, (even 'I don't know' is a good answer to work with), that will help all angles.