Annuity Companies vs Banks

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Welcome to shooting it straight with

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Stan. I'm your host Stan the Annuity

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Man. America's annuity agent licensed in

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all 50 states with an itch in my nose.

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Sorry, but that was gross. What are you

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doing, Stan? Picking your nose like

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that. That's

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gross. I understand. But you know, you

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get older and um just everything falls

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apart. Nose, eyes, everything.

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Everything, you

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know. Hey, today's topic is a good one.

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And Chester the Grinch is back there

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with his wild wild west cowboy hat on.

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Why? Because it's been the wild wild

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west here with banks a little bit. Nod

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your head. And today's topic is annuity

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companies aren't smarter than banks.

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They're

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not. They're just more

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regulated. Let me tell you a little

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story. Long time ago, few years ago,

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there was this pandemic. Some say it

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came from a wet market where like

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turtles were making out with bats who

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were loving on ducks who were then

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kissing the snakes. I don't know what

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was going on. And then some say it went

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from a lab in China over here.

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Regardless, it was a mess. Can we say

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Mhm. It was a mess. It was a mess for

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the world. It's a mess for this

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country. Our politicians, both sides,

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decided to print money to keep people

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home, to keep the the grease on the

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skids, as they say.

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going and that caused

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inflation. So

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inflation taking off and are fed.

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Chairman Pal and his friends at the big

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marble table where they have both donuts

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and bagels that we pay for. So if you

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want the bagels and the donuts, you can

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get that. So they raised interest rates

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drastically. So what did that what

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happened with that? Well, as you know,

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or if you don't, I'm getting ready to

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tell you, bond prices are like

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seesaws. Interest rates go up, bond

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prices go down, and vice versa. Okay?

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So, interest rates went up, bond prices

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went down, and some of those

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banks had to fire the bonds, which

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leaked out to the internet. We're in a

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global 247 nature right here within

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social media and there was a panic and

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all hell hell break loose hell broke

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loose break loose break. I don't think

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so. You know what I'm saying though? It

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got ugly and it got scary and there was

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a run on the

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banks. Now, of course, the banks in

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question, I don't know enough about the

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details, but what I've read from people

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that I actually trust in the news, it

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was not managed as well as it should

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have been. hindsight 2020 like back

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tested returns,

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right? Um don't buy back tested return

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numbers, but but the bottom line is

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there was a run and there was there's

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issue. There's still

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issues. One of my former employers, UBS,

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bought Credit Swiss. No, they didn't. It

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was a shotgun wedding. They were forced

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to buy Credit

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Swiss. I think it's the Grinch, man.

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He's making my nose itch. they were

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forced to buy. I mean, there's all kinds

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of things that are happening right now

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that, you know, when the government

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comes out and say, "All is well, all is

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well. All is well." I when I when I hear

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that, I envision Animal House movie

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where the guy is at the parade and he's

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saying all is well and people are just

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trampling him. When the government says

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all is well, I'm like really? I just

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kind of look straight at them. So, but

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it gets to the topic of annuities aren't

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smarter than banks. They're just more

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regulated. He say, "Wait a minute.

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Explain. I'm going to do it in English.

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Now, the good news is I did it at a very

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high level with my podcast, Fun with

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Annuities. If you go to that, uh, you

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can pull it on all major podcast

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platforms or you can watch the video of

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the Fund with Annuities YouTube channel.

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And I had John Lind on. I call him the

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annuity architect, but it's 40 years of

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absolute smartness in the annuity

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industry. We broke it down. Banks versus

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annuity companies. I'm not saying one's

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better than the other. I'm just saying

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that they're annuity companies are more

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regulated. Also, they put in place

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things so that there really can't be a

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run on the annuity company. Let's take

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Migas or indexed annuities or variable

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annuities or deferred deferred annuities

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as an example. You hold them for a term.

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So, there's a surrender charge. So, if

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there's a run on them, then you're going

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to have to pay the surrender charge to

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get out of it. A lot of these multi-year

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guarantee annuities also have what's

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called market value adjustments. Meaning

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that if you buy um a MIGA and interest

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rates go up after you buy it, then the

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sales charges are going to go up if you

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try to liquidate it. The bottom line is

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the annuity industry has put in place

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features to not only protect you, the

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consumer, which is their ultimate goal,

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period. But to protect the industry as

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well see with banks, as you know,

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there's a window and you say, "I want my

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money. I want my money. I want my money.

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I can just hear my mom. I want my money.

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I want my money right

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now. With annuity companies, life

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insurance companies issue annuities.

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There's no window. And let's get back to

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the bonds. Remember I talked about the

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the banks having to sell the bonds in

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some cases for whatever those ratios are

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with banks that have they have to hit

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from a solveny issue, etc. Annuity

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companies are buying the same investment

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grade bonds. They just don't have to

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sell them. They're going to hold them to

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terms. They're going to hold the coupon.

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Okay.

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That's I mean it's really that

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simple. The other thing too is with

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lifetime income products. Let's go over

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those real quick. Single premium

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immediate annuities spas deferred income

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annuities DAS which is the same thing as

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a SPIA. You just defer it. Qualified

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longevity annuity contracts QAX which is

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a DIA that you can use in an IRA. And

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then income writers attached to an index

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annuity variable annuity etc. Those are

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the four ways to get lifetime income

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contractually.

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Let's talk about SPSDs and QLEX for a

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second. Those are

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irrevocable. When you buy them, you're

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ripping the knob off a water faucet. In

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this case, it's an income faucet.

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Income's going to flow. We can structure

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it however you want to structure it.

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There's 40 different ways at least, but

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most people structure it so you get a

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lifetime income as long as you

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are breathing. And when you die, 100% of

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any unused money goes to the

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beneficiaries because the income stream

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amount is a combination return of

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principal plus interest.

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But there's no run on that. There's no

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run on lifetime income. In other words,

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I want my lifetime income back. I want

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my immediate annuity money back.

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No. Same thing with DS. Same thing with

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QAX.

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So the annuity industry from a product

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design standpoint and what they offer

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from a limited product

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standpoint, it prevents

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runs, people panicking and running and

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getting their money out. It prevents

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that. Don't make them smarter than

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banks. It just is what it is. They're

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also not making car loans and all that

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stuff. They're not doing any of that.

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There's stringent rules for annuity

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companies to put 100% or more of your

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money in investment grade bonds day one

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when you buy a fixed annuity. We can go

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down the rabbit hole. Well, Stan,

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investment grade bonds are really run by

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China and their brothers in Russia and

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also UFOs. We could do that all day long

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if you want to. But that's those are the

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rules. Investment grade bonds.

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Someone asked me the other day, "Well,

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what happens, uh, Stan the Annuity Man,

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if these double A+ carriers, these AAA

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carriers go out of business?" I'll tell

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you what happens. Me and you are in the

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grocery store fighting for bread, and

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I'm going to win because I'm going to

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kick you in the knee first and then

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punch you in the throat and then take

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you nicely, of course, not really hurt

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you, and then take the bread from you.

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In other words, there's no power. It's

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anarchy. So, don't even go down the

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rabbit hole. Period. I'll let you split

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it up under the state guarantee fund

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rules if you want to and wear belt and

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suspenders like my uncle Chester does at

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the family reunion. You know what I'm

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talking about over there. I mean, he's

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seen it. You can wear the wear the belts

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and suspenders if you want to. Here's

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the other thing, too, about banks and

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annuity companies. Annuity companies and

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their actuaries, they're always running

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stress tests and what if scenarios and

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worst case scenarios and all this stuff

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all the time. They're not waiting for

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things to happen for them to do that.

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Now, the bank situation that just

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happened, did that send the actuarial

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analytical group at at life insurance

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companies into a tizzy? Yeah, they all

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ran out of the closet,

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went and then they ran back in and did

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their mathematical

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calculations. I love those guys. I mean,

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they they took math classes that this

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they took math classes like if I would

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have walked in the first day in college

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and just seen like the first, you know,

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syllabus or whatever, I'd Okay, it's

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time for me to leave now. Come on. Come

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on, Chester. Bring your cowboy hat.

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We're going out of here. Okay, we're

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going to go take basket

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weaving. But seriously, annuity

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companies once again, they're showing

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the consumers that you might hate all

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annuities. Like the guy on TV said,

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you're an idiot if you do because you

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already own one. It's called social

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security. You might just, oh, annuities

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are expensive. That's dumb, too. You

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might want to stop talking because

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you're making a fool out of yourself.

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But what the annuity companies are

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showing right here, the rules that are

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in place are strong. And the National

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Association of Insurance Commissioners,

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NIC, each commissioner, each state has a

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commissioner that oversees annuities,

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fixed annuities, etc. Those cats and

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catets are doing a great job because

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their job is to protect the consumer.

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Their job is to make sure that these

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carriers that they are approving for

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their state in their state to sell

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product to their residents are solvent,

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are following the rules, etc. What

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happens if somebody doesn't follow the

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rules and lies on the uh financial

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paperwork? They will absorb them. That's

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what the state guarantee fund is all

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about. or a company, a larger company

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will come in and buy that smaller

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company. And so the confidence, the

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golden goose of

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confidence is in

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place. So banks are not smarter than

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annuity companies. Annuity companies are

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just handcuffed not to do stupid things

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because if they were given the reigns to

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do stupid things, they would do stupid

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things. They just don't. And that's a

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good

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thing. And and I applaud the National

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Association of Insurance Commissioners

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who are probably wincing at this like,

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"Oh, Stan, he gave us a compliment. Oh,

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we didn't need that." They they're doing

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a good job. They're doing a good job

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overseeing and making sure and and and

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I'm going to tell you this right I'm

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gonna tell you this right

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now. This banking thing that just

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happened is gold for the annuity

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industry. not from the standpoint of

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money flowing in, but what it's going to

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do is ramp up ramp up the

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NIC to oversee more stringently and to

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make sure that the carries are are just

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everything's in order. Not that it

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wasn't before, but I'm telling you,

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whatever fine tooth comb they had, they

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got a bigger comb. And that's a good

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thing because there's 11,000 baby

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boomers hitting age 65 every single day

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looking for guarantees, looking for the

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promise and the guarantee contractually

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that they're going to get income for

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life or they're going to get the

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principal

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protected. That's a good thing. So, I

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love this country. I might

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sing, but I'm gonna tell you something.

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I love this country. I'm gonna tell you

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why. Because situations like this that

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are happening with the banking industry

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make us

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stronger. We don't just sit back and go,

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"Man, that stunk. That hurt. That's

12:06
going to leave a mark." You know, it's

12:08
like Chris Farley in the movie when he

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got hit by the 2x4. He goes, "It doesn't

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hurt here or here. It hurts right

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here." The scars from something like

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this will help the consumer. The scars

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from lessons learned will make us

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better. It always does. That's why we

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are who we are, the United States of

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America. And I am proud to

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be America's annuity agent. My name is

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Stan the Annuity Man. See you next time.