When I first started in the business in 2008 FIA sales totaled about 26 billion, many experienced financial professionals forecast that the FIA space will grow to over 100 billion in the near future.
The growth of this insurance product mainly comes from challenging market conditions, a perpetual low interest rate environment, and financial professionals looking for fixed income alternatives outside of bonds.
So the natural question I get asked from a lot of the financial professionals new to the FIA products is how do we position these insurance products to be suitable with our clients? Below is a simplistic way that I explain these insurance products and their functionality inside of a retirement income strategy.
The basics are very easy. Safety of principle, reasonable rate of return, and a lifetime income stream that your client can’t outlive.
The challenge is, how do I know what insurance product will be the appropriate fit? There are literally hundreds if not thousands of insurance products available today and each one has a specific design and place.
When looking at the FIA space any insurance product will fall in one of four categories:
- Accumulation – a favorable return with no risk to principle (we have seen treasuries plus 2% as an average rate of return over the life of an insurance product)
- Performance Based Income – guarantees to income with upside potential based on indexed interest growth
- Guaranteed Income – pension style income with a guaranteed payout at specific ages with no potential for increase in the future
- Legacy or Death Benefit
I know there are probably a couple other situations that come up from time to time but many of my conversations tend to lend themselves to these conversations. What my job is here at FIG is to filter down the appropriate insurance products in each category. Every quarter we identify the two more favorable insurance products for each category and share the competitive advantage of where they may fit in your client’s financial strategy.
At the end of the day the story is simple. Positioning an FIA is about safety of principle with a reasonable rate of return and an income stream that your client can’t outlive. Nothing more, nothing less.
Guarantees are backed by the financial strength and claims paying ability of the issuing insurance company.
FIG does not give tax or legal advice. Your client should consult with and rely on their own tax and legal advisors regarding their particular situation.
This is not a comprehensive overview of all the relevant features and benefits of any particular product. Be sure to review all of the material details about any products referenced in this article before making specific recommendations to clients.