Displaying items by tag: fixed annuities
Advisors who are receiving inbound interest from clients about annuities might be interested in browsing a list of top recent providers. AIG, John Hancock, Lincoln Financial Group, Pacific Life, and Prudential regularly figure among the top players in the space. That said, data from 2019 has highlighted a new leader of the back—Jackson. “Jackson has dominated the variable annuity market for the past 7 years. In 2019, Jackson diversified its annuity sales to focus on growing its fixed annuity market share, which propelled its overall growth in 2019”, according to an annuities strategist.
FINSUM: One thing that is interesting is that the annuities industry is actually getting a little less consolidated (which stands in contrast to other product sectors, e.g. ETFs). The top three providers only account for 22% market share, down from 25% in 2014.
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.
One of the most commonly asked client questions about annuities is “what is the best age to buy one?” The answer, as advisors know, is that there isn’t one; it depends on your financial goals and circumstances. That said, there are a couple things to bear in mind. Firstly, those in their mid-40s or younger should almost certainly not consider annuities (outside of some variable annuities) because they have the time to take additional risk (and get the additional growth) of direct exposure to the market. On the other end, annuity availability for those 80 and older declines rapidly. Accordingly, depending on circumstances, the sweet spot is likely in that range.
FINSUM: Annuities seem to be best bought for what they guarantee, not what they might offer, as downside protection and income protection are truly the name of the game.
Usually, down markets are a very good tailwind for fixed annuities. With losses mounting, the prospect of full principal protection is usually very appealing. However, something odd is happening across the market—insurers are pulling many products from the shelves. Unlike the empty shelves in your local grocery store, it is not because they are selling out, it is because insurers desperately need to reprice the products given the huge moves in interest rates and market prices, and they do not have enough capacity to do this on the fly.
FINSUM: From a buying perspective, this market is perfect for fixed index annuities. Advisors may find some very attractive offers for clients.
Very high stock market prices and the continual threat of major downturn has sent fixed index annuity sales surging lately. Fixed Index Annuity sales accounted for 57% of all annuities sales in 2019 and amounted to $74 bn. “The high number of fixed-index annuity sales are a response to investors observing that the market continues to go up and this is a strategy to put a safety net under their portfolio if the market fails”, says one advisor in Pittsburgh. Fixed Index Annuities guarantee your principal while still offering limited upside, so they present a compelling case for people worried about a big downturn who need the peace of mind of principal protection and a steady income stream.
FINSUM: This is a perfect market for FIAs because of sky high prices and falling bond yields (which sap income). Just make sure you completely understand the contracts.