Fixed Indexed Annuities Gain Traction and Popularity
In years gone by, Fixed Indexed Annuities (FIA) were considered by the stock broker and Wall Street world as stupid, dumb and of no value. Of course that was because stockbrokers wanted to sell their own product, variable annuities (a security) instead of an insurance product (FIA). Now it seems the tide has begun to turn. Turning to a product which attaches itself with two very important words Baby Boomers are searching for: Safety and Security.
Fixed Indexed Annuities are a fully guaranteed insurance product who’s crediting (interest earned) is tied to an outside source such as the Standard and Poor’s 500 Stock Index. Annuity owners don’t fully capture the index’s performance; they would earn a portion of the market gain as a trade-0ff against exposure to any risk. The amount of participation depends on the company and the actual product series offered.
Not many brokers and financial planners are considering Fixed Indexed Annuities as a viable fixed-income alternative and a possible provider of lifetime-income benefits.
A recent article in Investment News (an industry magazine) stated Raymond James reported an increase in the sale of FIA will hit $330 million this year, an increase of 60%. The leading independent broker in America based in San Diego, LPL, reported sales of fixed indexed annuities through the third quarter of 2013 at LPL hit $649.4 million — up 15%.
The combination of 10,000 Baby Boomers reaching 65 each day and the fear of an overpriced stock market have brought a huge focus to the FIA segment. “People just don’t want risk any longer and are searching for stability” says David Townsend, an annuity industry leader and owner of www.annuity.com.
New products have been introduced as the popularity of the category increased. Now products can offer a guaranteed interest rate if the annuity is targeted to be used as an income stream. Some companies will guarantee rates as high as 8% per annum. “If used properly, a Fixed Indexed Annuity can help stabilize the retirees guaranteed portion of their retirement income,” says annuity insider Townsend.
With the advent and movement to the broker dealer arena for FIA products it is a sure bet that this segment of the guaranteed income choices will increase as more main stream acceptance comes.