When a Client is Unhappy with Index Annuity Returns
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Some clients are expressing frustration about their index annuities not performing well over the past couple of years. I spoke to one who felt like he had been misled into believing that he would see great returns every year in his index annuities—and said he wanted to start taking free withdrawals to “get out of these terrible annuities”. So I asked if he had any money in the market, and he said “yes”. When I asked how that money has done over the past two years he explained that he had lost 17%. So I explained the following…
Me:
So your safe money in index annuities has gained an average of 2% over the past two years, while your risky assets have lost 17%. Right?
Client:
Yes.
Me:
So your ‘safe money’ in the annuities is 19% ahead of your ‘risky money’, isn’t it?
Client:
Well…I guess so.
Me:
That is exactly why you got into index annuities in the first place. Remember?
Client:
Huh? What do you mean?
Me:
Remember when I initially explained to you how index annuities give you great returns when the market goes up, and then lock in the gains and don’t grow very much when the market is down? And, remember when we looked at the illustration—and how some years there was little or no gain in the annuity…but over any 10 year historical period, the worst you would have received was an average of 7%?And, remember when we looked at the illustration—and how some years there was little or no gain in the annuity…but over any 10 year historical period, the worst you would have received was an average of 7%?And, remember when we looked at the illustration—and how some years there was little or no gain in the annuity…but over any 10 year historical period, the worst you would have received was an average of 7%?
Client:
Yes.
Me:
That is exactly what is happening. We just happen to have started off with a couple of down years in the market. But that is actually the very best time to have gotten into annuities—so you avoid the losses like you are getting with your risk assets.
At this point ...
At this point the client was able to see that the safety of protection against loss was actually a great benefit, and decided not to take penalty-free withdrawals from his annuities.
If you would like help addressing any client concerns, give us a call and we can help.
Rates Are Back Up
Last month we talked about the rates on crediting methods with a few carriers had dropped for the first time in years. Well, as predicted, it was not the beginning of a continuing trend. Many carriers have raised rates in the past few weeks, and one even raised the rates they dropped in January—back to the levels they were before the drop!
Give us a call if you would like to talk a bit more, or have any questions.
~ Greg Skogsberg
800-200-9194
We now have annuity contracts with FORTY-FIVE carriers. More than any other FMO! And this is just one of the reasons we are The #1 Concierge FMO in America!
Gregory B. Skogsberg
Greg is the President of TWH Agency with 20+ years of professional experience. Greg is a seasoned management consultant who has worked for organizations of all sizes in locations all across the country.
