I Really Want to Get into the Annuity Market, but Have Reservations...

[Tahoe Ray]

Oh yeah, paying an extra 1%-2% for M&E... plus any charges for Riders.... plus the normal ER..... what a way to grow your money.

If someone wants the benefits of an Annuity (assuming you mean the guarantees) then the market in general is not right for that bucket of money. (generally speaking)

IAs offer much stronger Income Riders vs. VAs.
So if that is what a client wants then they should go with the IA.
A VA just waters down every benefit involved.

jmo

Not to mention that if you do want a VA rider, it is unlikely you'll be able to get maximum equity exposure anyway.

A couple years back, some carriers (Jackson comes to mind) would let you invest 90% plus in equities. Now most products stuff you into some model that has high management fees and reduced "volatility" (for the clients' own good, right?)

With a rider, M&E, management fees, and a 70/30 stock/bond ratio, what is your expected rate of return? Not as high as the industry would want you to believe...

Now, if you're using a product like Jefferson National (with no M&E, surrender, or rider fees) and you're just trying to get market growth w/ tax deferral then sure...you could see much more upside over the long haul.

But then again, that would be expected, right? As scagnt83 points out, FIAs are not meant to outperform the stock market in the first place.

 

[jmhalvo]

I agree it's a fixed income play. I agree that it is often implied that great gains are possible long term. However, I also meet retired prospects every week, and notice that those with FIAs are, in general, the most satisfied with their "investment". It's just my experience here in flyover land.

 

[pfg1]

Even though they aren't "in" the market, on the good years the FIA's that hit it just right can actually do very well. I have a couple clients that earned over 15% this past year on a FIA. Not bad for a product with no risk. But I would agree, closer to 6% long term is probably more typical.

A friend of mine who has a FIA personally, got over 21% a few years back, his hit it just right on the monthly pt to pt. I would say that is pretty rare, but it does happen. Sure makes up for some of the low or no gain years with a return like that.

 

[scagnt83]

Even though they aren't "in" the market, on the good years the FIA's that hit it just right can actually do very well. I have a couple clients that earned over 15% this past year on a FIA. Not bad for a product with no risk. But I would agree, closer to 6% long term is probably more typical.

A friend of mine who has a FIA personally, got over 21% a few years back, his hit it just right on the monthly pt to pt. I would say that is pretty rare, but it does happen. Sure makes up for some of the low or no gain years with a return like that.

Exactly, the risk adjusted return is actually very high.

The only fixed income instrument that can compete would be corporate bonds or Munis. And obviously the IA comes with a lot less risk than a AAA. And even less risk than many Munis. No bond offers SGA protection... or reserve requirements...

mP2P can be a strong option in bull markets. I had plenty of clients that hit 10%+ over last year.

 

[pfg1]

mP2P can be a strong option in bull markets. I had plenty of clients that hit 10%+ over last year.

Yep.
The million $ question is... what option will be best moving forward? I feel like the run is coming to an end, and the mP2P has likely run its course for now.

 

[scagnt83]

Not to mention that if you do want a VA rider, it is unlikely you'll be able to get maximum equity exposure anyway.

A couple years back, some carriers (Jackson comes to mind) would let you invest 90% plus in equities. Now most products stuff you into some model that has high management fees and reduced "volatility" (for the clients' own good, right?)

With a rider, M&E, management fees, and a 70/30 stock/bond ratio, what is your expected rate of return? Not as high as the industry would want you to believe...
.

Good points. Last I checked JN still allowed 90% to be allocated as you choose.
But Pru is a 70/30 mix... along with most others.

----------

Yep.
The million $ question is... what option will be best moving forward? I feel like the run is coming to an end, and the mP2P has likely run its course for now.

Id agree. I dont see the mP2P doing well past 2014. Im looking to switch most allocations over to Yearly Cap or PR this year as contract anniversaries hit. I might be wrong... but the Fed has announced an end to QE in 6 months... and that will likely put an end to the raging bull

 

[ksagent23]

Yep.
The million $ question is... what option will be best moving forward? I feel like the run is coming to an end, and the mP2P has likely run its course for now.

What are you thoughts on uncapped spreads?