FIAs: The Real Story: Shootin' It Straight With Stan

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welcome to shooting it straight with

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Stan I'm your host Stan the annuity man

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America's annuity agent licensed in all

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50 states today's topic is Hidden Truths

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and facts about fixed indexed annuities

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now we get a lot of calls about this

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because you know they're people are

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getting the sales pitch that sounds too

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good to be true because it is we have

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nothing against index annuities a little

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history on index anues the Hidden Truths

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and facts we're starting early um

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indexed annuities were put on the planet

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in 1995 to compete with CD returns in

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other words the The Hope and the goal of

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the of the structure and the strategy

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was to get a a couple more percentage

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points than a than a than a CD um and

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they've done in that range okay they're

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not market products I think one of the

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biggest fallacies is how they're sold as

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you know some of the catchphrases or

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Market upside with no

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downside um you know Market upside with

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principal protection all the all the

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little nuanced things that sound too

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good to be true because they are they're

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not market products these are fixed

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annuities they're issued by life

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insurance companies they're regulated at

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the state level they are not Securities

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they're not regulated by finra or the

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SEC so it's kind of the WW West

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unfortunately with a lot of sales

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pitches not all but if you go to the

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seminars and the the expensive Stak

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seminar dinner seminars most of the time

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there it's a one- siiz fits-all one

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carrier approach apprach trying to sell

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one product to everybody which is insane

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it's like a doctor holding a seminar and

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trying to sell one medication to

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everybody in the room everyone's

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different you know people either need

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annuities or don't need annuities but

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index

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annuities I think of the current go- go

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product uh and popular product in the

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industry because it has the highest

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commission the high in all commissions

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with

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annuities plural all types are buil in

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and hidden from the client which I'm not

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sure I like but it's the rule um but it

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is the highest it is the highest

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commission it's the one that if you sell

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enough of it you go on the trip to Italy

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or Bora Bora or France or whatever with

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your girlfriend boyfriend wife husband

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whatever applies um those incentives

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went away in the Securities industry in

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2003 I believe and I wish they'd go away

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in the annuity industry as well but they

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have not the annuity industry life

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insurance Lobby is pretty strong on the

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hill so I doubt if that going to happen

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so couple more facts and hidden things

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about index and new you need to know um

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the indexed option strategies on the

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accumulation value um and that's the one

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if you've ever been if you're probably

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breathing with a bank account someone's

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tried to pitch you one it's the one that

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has the caps and the spreads and the

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participation rates all these foreign

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things you never heard of what those are

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are levers that the life insurance

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company that's issuing the index annuity

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use to limit the upside um um you know

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they're for profit remember they're

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trying to do CD returns a little bit

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better um there but I think there might

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be even more but let's just keep it I'm

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I'm pretty confident there's more than

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750 choices think about that 750 index

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choices my opinion you could throw a

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dart at all of them and you'd be okay um

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and it's because they're all kind of

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designed to get the same return anyway

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in most cases um the other thing that

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you want to know there's over

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50 or more index choices and you're like

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wait a minute Stan there in there

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there's S&P there's Russell there's you

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know and you can count them on your hand

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I think one of the issues with the index

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annuity space what's happening too often

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the carriers will do what's what's I

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call an algorithmic back test in other

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words they'll create an algorithm to go

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look for a return with a basket of

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Investments once they find that return

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that looks great but yet it's

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hypothetical not guaranteed then they

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will name that index attach it to an

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indexed annuity and then the

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salesperson unfortunately might say well

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if you'd owned it 10 years ago this

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would be your return unfortunately it's

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been around about three months so a lot

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of states are starting to disallow that

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kind of back testing but you know

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combine this you have 50 plus indices to

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choose from you have 750 index option ch

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choices and then on top of that most at

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the time of this taping most index

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options are a year in length but there

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are some that are two years in length

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and three years in length and four years

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in length and five years so that gets

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even more

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complicated um some of majority of them

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at the time of this tapen you lock in on

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the anniversary day so you're kind of

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slave to the date but some will allow

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you some of the longer term will allow

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you to lock in whenever you want to lock

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in which just adds the to the confusion

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in my opinion as a side note at the

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annuity man we typically 99% of the time

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use index annuities as a very coste

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effective and efficient delivery system

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for income writers which is a

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contractually guaranteed income that you

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can attach at the time of application to

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the policy so that's if you go to my

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site at the annuity man.com you'll see

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income writer quotes you won't see index

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annuity quotes because there's nothing

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to quote

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I mean there's just there's nothing and

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the reason I say that is getting back to

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the caps and the spreads and the

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participation rates and if you want to

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go down that rabbit hole I've done

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videos on that I've written an indexed

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annuity owners Manu you can get for free

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at my site at the annuity man if you

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really want to go down the rabbit hole

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I've done it but um the way that the

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indexed option is is structured is that

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it's a year in length in most cases okay

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so let's start with that one I always

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tell people let's just say you bought a

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10-year fixed index annuity Standalone

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for growth unfortunately you bought it

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for growth it's not a growth product and

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you have you know what the cap and the

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spread and the participation is uh from

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the start the problem with that is that

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you really own a one-year guarantee on a

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you own a one-year guarantee with a

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10-year surrender charge because the

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annuity industry can change the terms of

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the cap and the spread and the

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participation rate at the end of

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iversary date now there's all kinds of

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sales pitches and renewal rate histories

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and all that stuff but the bottom line

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is the annuity industry kind of has you

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you know from the standpoint of what

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it's going to be I've seen I've seen

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some rugs pulled out from people where

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you know there was a 7% cap and then

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year two there's two um we've seen that

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and I'm not against the the anity

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companies they're for-profit business

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they got to do what they've got to do

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but it leads it leads me back to never

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buy

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indexed annuities for the um for growth

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you should buy them for principal

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protection first okay then CD type

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return second and then third you know

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what we use it for which is the

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attachment of an of an income writer if

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you need income in the future and and we

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like index annuities using it that way

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because at the end of the surrender

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charge time period if you don't need the

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income and things have changed in your

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life or you just don't want to do it

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anymore you can get all your money back

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on whatever that accumulation value has

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grown too but it's very very comp the

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index side can be very very complicated

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always joke that I know five people no

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that that I know five people um that

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fully understand index annuity um you

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know options I'm one of them I think I

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know the other four but I'm one of them

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um but if you can't explain it to a

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nine-year-old don't buy it no offense to

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niney olds so um the other thing about

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the the indexed annuity it kind of

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became popular in that 2008 debacle back

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then because people were I mean people

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were Shell Shocked it was it was a

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perfect time to introduce the product

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it's just been overhyped in my opinion

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by too many agents because it is a is a

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high commission product and it is a good

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it's a good story you know if you're not

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telling the the total truth if you're

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giv the 30,000 foot view it's a really

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good story you know you get upfront

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bonus you get Market upside with no

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downside you get free long-term care and

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you get a lifetime income let's break

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that down The Upfront bonus is candy for

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the stupid um buying an upfront B an

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index Noy for upfront bonus is like

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buying a brand new car for the stereo

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system there's 100 pennies in the dollar

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that should be irrelevant to your

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decision you should quote all carriers

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to see who provides the highest

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contractual guarantee whether it has a

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bonus or not so that's kind of a a

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nebulous over pitched part the market

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upside with no downside is is completely

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wrong

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um and borderline fraudulent because

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they were put on the planet in 1995 to

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compete with CD Returns the third thing

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they say well you get free long-term

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care no you don't uh it's confinement

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care long-term care is its own product

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and long-term care pure long-term care

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is a health insurance product with very

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good tax benefits but it has is nowhere

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to be found inside of an indexed annuity

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and then the only truth of that four

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part sales pitch is the lifetime income

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with the income riter but if that's what

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you're trying to go do then shop all

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carriers go to our site and just shop

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all income riders for the highest

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contractual guarantee there is no one-

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siiz fits-all that's the kind of the

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Hidden truth about index anois it's not

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a one- siiz fits-all product you know

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you need to solve for goals specifically

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annuity Soler four things principal

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protection income for Life Legacy and

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long-term care if you don't need to

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Soler one or more of those then you

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don't need an annuity and and you don't

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buy a product that tries to solve for

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them all you take one of the goals and

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then you shop for that for that carrier

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that provides the highest contractual

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guarantee for one of those items in the

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pill if it's if it's lifetime income go

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shop lifetime income products if it's

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principal protection go shop principal

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protection products never you know again

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The Upfront bonuses is nonsense and

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then the index option side that's so

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complicated I had a guy called me the

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other day he said you know you sent me

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the specimen policy on the which we will

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do on the index annuity and and all of

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the explanations were these complicated

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math problems with with letters in them

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I said yeah that's calculus it's it's

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very high level

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stuff of which they can change the

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rules um at this at the time of this

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taping we have yet to be approached and

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be shown an indexed annuity that between

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myself my management team the

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Consultants I hire outside uh that we

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deem appropriate to to um recommend for

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accumulation value we just pretty much

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use it as and love this as an efficient

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principal protected coste effective way

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to provide income writers and future

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lifetime income streams starting at a

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future date so that we love them for

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that but they are very very complicated

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um they're presented as as too good to

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be true but those are some of the facts

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that you probably didn't know 1995 they

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were introduced over 700 50 index option

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choices um over 50 in indices index

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choices oh and the other thing that you

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need to know about the index is is those

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don't include dividends so if you if

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you're a a market student you understand

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that over 50% of the return of the S&P

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500 Index are dividend based and so

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there's no dividends uh with these with

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these index and then the other thing

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just really be careful upfront bonus you

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just got have to be smarter than that

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there's a 100 pennies in the dollar

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and you just can't just think of the

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analogy I gave you walking through a car

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dealership and they're telling you about

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the transmission and the V6 or whatever

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you're like I don't care anything about

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that I just want to hear the stereo

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system that's how stupid it is to make a

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decision on on um an upfront bonus and

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it's also revealing if an agent or

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advisor keeps talking about The Upfront

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bonus it's a shiny thing it's it's a

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distraction I wish I wish companies

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would do away with it but I understand

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it's a capital capitalistic Market

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they're trying to attract um you know

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all of you 13 to 15,000 Boomers that are

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hitting 65 every single day I get it um

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but the other thing and I'll close with

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this index annuity is nothing wrong with

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them you just got to know the facts you

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know again you can get my book you can

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watch all the videos I've done on them

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um you know you can talk to us and and

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and schedule a call but they are not too

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good to be true you know the sales pitch

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if if you could really get Market upside

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with no downside consistently that's

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what Goldman Sachs and JP Morgan and

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Morgan Stanley would buy in spoiler

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alert having work there and in New York

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they're not buying those so it's a it's

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one of those things where I I feel like

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the consumer getting taken advantage of

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and that's the reason that I do these

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videos I'm not better than anybody else

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I'm just trying to warn you that these

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products aren't going to do what you

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want them to do um and if you buy the

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dream you're going to own the

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contractual reality which means that if

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you're going to buy them by the

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contractual reality that's that's that's

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pretty much it when it comes to fixed

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index annuities my name is Stan the anuy

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Man that's shooting it straight with

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stand hope this helped we'll see you

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next time