Help me out here. I read about how this or that FIA can make a client potentially much more than another FIA. Question: is that possible over time? I mean, it's a fixed income product with the ins co investing in options/bonds underneath it. Well, the bond rates are what they are, and options cost what they cost. So how can one FIA pay much more than another OVER TIME. It would seem that after a couple of years of " over paying" based on whatever the current rate environment is, they would be forced to lower caps. They all live in the same fixed income world, right?
FIA Competition
- Thread starter jmhalvo
- Start date
You are kind of correct but missing some other pieces. Not everything gets invested into fixed products. They diversify their portfolios with other items like real estate, stocks, etc. Just like investors, some make more than others. Some are willing to take more risk than others.
- Thread starter
- #3
In that case I will take a bit less now to mitigate the risk of lower caps later when the "extra risk" doesn't pan out for the ins co. However it is not my understanding that FIAs are backed by long equity positions
- 8,707
Good question. Mainly it is based on what the portfolio rate the company is recieving. They first must guarantee the funds return back to 100% so if they have a higher portfolio rate it takes less of the clients dollars and more money is available for options. Problem is how can you know which carrier is getting a better rate and the current cap or participation rate is not a teaser being used to buy dollars which will drop significantly next policy year.
- 1,206
American equity brags about posting their renewal rates on their web site. It's pretty consistent. Not sure I have seen any Better
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