Wanted: $30 billion in lost annuity sales
The past few years have been a rollercoaster for agents and advisors in the financial services industry. In 2010, indexed annuities had a banner year. At the same time, we saw fixed annuity and MYG production decline from $67.2 billion in 2009 to just $35 billion.1 You and other producers are familiar with the benefits and features of fixed annuity products and are telling their story. So what happened to the $30 billion in lost sales?
Traditional fixed annuities continue to face a growing number of challenges including record-low interest rates, more stringent compliance requirements, negative industry press and increased carrier level suitability requirements. This might explain why fixed indexed annuities (FIAs) represented over half of all the fixed deferred premium sold in the fourth quarter of 2010.1 Agents should consider offering FIAs as an alternative to traditional fixed products, and Lincoln Financial Group has an array of FIAs that closely resemble traditional fixed products.
Essentially, consumers are looking at two asset alternatives. If their money is in the bank (in treasuries, money market accounts, checking accounts or CDs), they may be comfortable knowing that their money is safe, but also unhappy with their current rate of return. On the other hand, consumers may have money tied up in the market (in bonds, stocks or variable annuities) where they appreciate the potential for return but aren't thrilled about the potential risk involved. With Lincoln's fixed indexed annuities, you have the ability to give clients and prospects the best of both worlds – a secure place for their money and the chance for higher interest when compared to other safe money alternatives.
The OptiPoint® Series
With interest rates at an all-time low, FIAs offer a unique combination of everything a client may be looking for without exposure to the market's downside potential. FIAs are safe and tax-deferred, offering competitive interest rates, liquidity and death benefits. They offer underlying guarantees to provide individuals with the peace of mind they desire. The national average for 5-year CDs is roughly 2.15%.2 For clients in a 28% tax bracket, current rates would net less than 1.5% interest. Right from the start, the OptiPoint 8 and 10 have a current 1.6% and 1.8% underlying guarantee respectively.
With interest rates at an all-time low, FIAs offer a unique combination of everything a client may be looking for without exposure to the market's downside potential. FIAs are safe and tax-deferred, offering competitive interest rates, liquidity and death benefits. They offer underlying guarantees to provide individuals with the peace of mind they desire. The national average for 5-year CDs is roughly 2.15%.2 For clients in a 28% tax bracket, current rates would net less than 1.5% interest. Right from the start, the OptiPoint 8 and 10 have a current 1.6% and 1.8% underlying guarantee respectively.
OptiPoint 8 has an 8-year surrender charge, a 3% premium bonus on $100,000 or more (2% for premium less than $100,000), and that bonus is available for 3 years on subsequent deposits. OptiPoint 10 offers a 10-year surrender charge and a 4% premium bonus (3% on premium less than $100,000) for 4 years on subsequent deposits. The annuities also offer competitive crediting methods including a fixed account with 1-year guarantee period, a performance trigger account and two 2-year strategies (point to point and monthly cap). In summary, clients get indexed interest roughly equal to a CD or MYG annuity in the worst case scenario, plus additional upside potential and a bonus! Meanwhile, you get the benefit of Lincoln's strong commissions – a 6% street level commission for the 8-year product and a 7% street level commission for the 10-year!
The OptiChoiceSM Series
If clients are looking for a shorter term product, the OptiChoice series might be the perfect solution. The OptiChoice 5 in particular features a 5-year surrender charge term and a 5% street-level commission. With a high potential monthly average fee strategy available and an underlying guarantee of
1.25% on 100% of premium, this product may be just the right fit for your clients who aren't looking for a long-term commitment.
The New Directions® Series
Lastly, let's look at Lincoln's best-selling New Directions series. It's unique because the fixed account is a MYG fixed rate that runs for 6 or 8 years. Your clients have the confidence that when interest rates are going down, their fixed rates will remain for the full term. Clients have the opportunity to move into or out of an indexed strategy while keeping that fixed rate option available.
Currently, these products are offering very competitive fixed rates. By using a 50/50 blend of fixed rate and performance triggered strategies, the 6-year product could return just shy of 4% and the 8-year just under 4.25%. Again, there is a 1.75% underlying guarantee on the 6-year product and a 2% underlying guarantee on the 8-year product, worst case scenario. These fixed indexed annuities with long-term interest rate guarantees may be perfect for the traditional fixed rate or MYG rate buyer looking for predictable fixed growth.
Found: The Fixed Rate Alternative
We may not be in control of rates, but we are in control of how we position FIAs. Lincoln has strong ratings from all ratings agencies. In addition to the strength of the carrier, look at indexed strategy stories from a solid product to help address your clients' financial needs. Present prospects and clients with FIAs as an alternative to typical fixed rate products. Call your Annuity Sales Consultant, and help your clients bridge the gap between risk and reward with features and benefits of Lincoln FIAs.
FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11604 - 2011/3/18
1 LIMRA, U.S. Individual Annuities, 2010
4th Quarter.
2 Bankrate.com, March 14, 2011.
Fixed indexed annuities are issued by The Lincoln National Corporation and distributed by Lincoln Financial Distributors, Inc. The Lincoln National Corporation does not solicit business in the state of New York, nor is it authorized to do so. Contractual obligations are backed by the claims-paying ability of The Lincoln National Corporation. Lincoln Financial Group is the marketing name for Lincoln National. Product features, limitations and availability vary by state. Fixed indexed annuities are not available in New York. Carefully consider the risks, expenses, potential loss of principal and clients' individual objectives before reallocating existing monies into these products.
Interest rates, specified rates, spreads and caps for fixed indexed annuities are based on contract features, including any bonus, additional rider benefits and the death benefit. Guarantees are backed by the claims-paying ability of the issuing insurance company.
Dennis Lee
Director of Annuity Sales Development
Dennis knows there is no substitute for bona fide experience when it comes to providing guidance to agents who work in the financial and insurance services industry. Prior to joining Creative Marketing, Dennis was a multi-million dollar annuity producer himself, with a Series 7 and life and health license. He is an important resource for his agents, drawing on his sales, teaching, coaching and administrative background to make agents jobs easier and increase
their sales.