(New York)

Many people who are thinking about annuities don’t realize that many of them are sellable products—they don’t necessarily have to be held forever (even if that is often the best strategy). So which annuities are sellable and which aren’t? In general, SPIAs (single premium immediate annuities), DIAs (deferred income annuities), and QLACs (qualified longevity annuity contracts) are not sellable; VAs (variable annuities), FIAs (fixed index annuities), and MYGA (multi-year guarantee annuities) are usually sellable. Each of those latter products have surrender charge time periods in them, so it may cost something, but it does mean money is not locked in them forever.

FINSUM: Since selling would usually not be the best idea, this is more of a peace of mind factor than anything else, in our opinion.

(New York)

Many RIAs across the country are worried right now. With fee levels often tied to AUM, revenue seems likely to take a ~30% hit this year. That is enough to break many RIAs, especially those who were previously running only 10% profit margins. So how can RIAs cope? Firstly, those who have been very tight on budgets are in better shape. Those who were operating at 30% profit margins should be okay. A few of the key aspects to consider right now are: reaching out to vendors to “share the pain”, changing compensation structures towards lower fixed pay and more incentive-based pay, and switching to a quarterly budget, which will better align expenses and income.

FINSUM: We might go through a long period of lean times, so RIAs need to act fast to get their fixed costs under control.

(New York)

Any investor cannot help but have noticed very unusual movements in markets over the last couple of weeks. In particular, Treasury bonds have been behaving very oddly. After yields predictably plunged alongside stocks a couple of weeks ago, there have been abrupt movements higher, with 10-year yields rising around 90 basis points (from 0.4% to 1.3%) in just a few days. Even now, when yields would presumably be nearing zero, they have been see-sawing and are still near 1%. The reason why appears to be panic-selling in an effort to get cash in any way possibly. In particular, large investors need to meet redemptions in other areas of credit, which are much less liquid, and since getting cash for their holdings there is impossible right now, they are selling Treasury holdings to get the cash to meet redemptions.

FINSUM: This is not unlike selling your valuables to meet mortgage payments. It makes sense, but it is a worrying sign and a symptom of how dire the market has gotten.

(New York)

A lot of advisors and investors are looking at fixed annuities right now, especially fixed index annuities. Such products offer principal protection and lifetime income, both of which are in short supply given current market conditions. It is important to remember though, that FIAs were only built to beat CD returns by a small margin, they are not supposed to have huge upside. With that said, there are ways to maximize returns, such as using income riders. These are extra features which provide higher lifetime income payments are a future date of your choice. They need to be added when you buy the annuity, not later, and do have annual fees.

FINSUM: Income riders are most popular with fixed index annuities, but do show up in some variable annuities and SPIAs.

(Washington)

President Trump is changing his view on coronavirus. When the virus first started sweeping the world, he maintained a cavalier attitude. He then pivoted to be very focused and concerned about protecting against the virus. Now he is moving back in the other direction, saying that at the end of the current 15-day lockdown, he is considering opening the economy back up, joining a chorus of business leaders who say that the “cure cannot be worse than the virus itself”.

FINSUM: This is a difficult and risky decision—lives or livelihoods? However, Trump proceeds, it seems unlikely New York, California, and Washington, will take his lead.