Updated January 29, 2024, at 2:57 PM
Fixed indexed annuity (FIA) sales continue to see strong growth.
And it 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 FIA products is:
How do we position these insurance products to be suitable with our clients?
How to Explain FIAs
The basics are very simple: the safety of principle, a reasonable rate of return, and a lifetime income stream that your client can’t outlive.
The challenge is how to know what insurance product will be the appropriate fit. There are literally thousands of insurance products available today and each one has a specific design and place.
FIA Insurance Product Categories
FIA products generally fall into four main 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 an increase in the future.
- Legacy or Death Benefit. The amount paid to a beneficiary upon the death of an insured person.
I know there are probably other situations that come up from time to time, but many of my conversations tend to lend themselves to these product types.
Then, I’ll narrow down the appropriate insurance products in each category. Each quarter, we identify two favorable insurance products for each category and share their competitive advantage. That is, 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 the safety of principle, with a reasonable rate of return, and an income stream that your client can’t outlive.
Nothing more, nothing less.
Related: Annuities & Peace of Mind
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.