Fixed Index Annuity vs Registered Index-Linked Annuity

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Hi there, Stan the Annuity Man, America's annuity agent, licensed in all 50 states with kind of the

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retro old-school Stan the Annuity Man sweatsuit. You don't see these anymore. This is kind of 1972.

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I don't know where I bought this, but of course I rolled it out. Today's topic is about indexed

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annuities versus RILAs, registered index-linked annuities. Oh boy, here we go. I'm looking

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forward to this a little bit, just to tell you the truth. You might not be ready for what I'm

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getting ready to tell you, but just understand it is the truth. And we'll do that after this.

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Alright, indexed annuities versus RILAs. FIAs versus RILAs. So FIAs, Fixed Index Annuity;

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RILAs, Registered Index-Linked Annuity. Fixed Index Annuity, just letting you know, to offer that,

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to sell that, you have to have just a state life insurance license. For RILAs, you have to have a

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securities license, Series 7 or the equivalents. So, you know, a little bit higher bar to sell the

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RIAs. Full disclosure, I do not have my securities license anymore because there's nothing on the

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security side that I want to sell, including RIAs, and I'll get to that point. But I used to

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be with Dean Witter, PaineWebber, Morgan Stanley, UBS. So, I've been on that side of the ledger.

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One of the biggest shocks of my life when I decided to become the mythical person Stan

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the Annuity Man and dominate the space out here and be America's annuity agent,

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I was shocked, and I still am, by the continued continuation,

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the proliferation of market dreams and market returns and back-tested numbers

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and all this stuff that seems to just permeate every sales pitch out there.

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I'm the pioneer of what's called CGO, contractual guarantees only. I came up

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with it. There are people that have followed me, but that's what I do. I don't look at any

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hypotheticals or theoreticals. In my opinion, to throw water on this topic,

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I don't think you should buy any annuity for potential market growth. If you want growth in

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a market, stock-market-type growth, don't buy an annuity. I know all the carriers saying,

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“You're wrong, Stan.” All the agents say, “You're wrong, Stan.”

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Okay. With index annuities, let's just cover that one real quick.

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That's a fixed annuity. It protects your principal 100%. There's zero downside,

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but you're not going to get market returns. It's a CD product. It was put on the planet

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in 1995 to produce CD returns. And guess what? Since 1995, that's what it's done

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historically. I don't know what else to say. Do we sell those? Yes, but only if,

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at the current time — check the date — only if there's an income rider attached for future income.

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So, in other words, we ask two questions. What do you want the money to contractually

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do? When do you want those contractual guarantees to start? If you say we want

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lifetime income and we want to start 2, 3, 4, 7, 10, whatever years down the road,

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income riders, we're going to quote that as one of the products. We're also going

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to quote deferred income annuities because those are the income-later products. But the

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income rider you can't buy as a standalone. It has to ride on top of a policy. The most

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efficient way to deliver that guaranteed income rider is with an index annuity.

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But do we look at the index annuity? Do we care about it from the standpoint of

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potential growth? No. No, we don't. Just because we know it's a CD product and

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that we're buying the income rider. That's the sole focus of what we do.

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Now, just in the recent years, RILAs have popped up on the scene. And I think having worked for big,

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large brokerage firms on Wall Street, they're always looking for these cute

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little packaged products that they can sell to customers,

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they can hopefully wrap a management fee on and make a commission and double-dip

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or whatever. I mean, they're looking for those products.

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And in my opinion, RILAs, registered index-linked annuities, are the securities industry's version.

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In their opinion, better than an index annuity. Okay?

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Now, I call RILAs co-pay annuities. Now, send your hate email to [email protected]. I

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call them co-pay because with index annuities, you got zero downside risk. Zero. With RILAs,

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you share in that risk. If you pay, there's a fee for levels of risk. Okay, sounds interesting.

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Sounds complicated. But RILAs, I believe, have a little bit more flexibility than index annuities

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to lock in gains if there are gains. So, there's a little bit more potential on the upside with the

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index than there is with index annuities. Either one, they're limited. Either one.

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And when we're talking about stock market growth, in my opinion, having worked for Dean Witter,

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PaineWebber, UBS, and Morgan Stanley, when we're talking about stock market,

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there should be no limitations. My opinion. So both of these products, to me, if you said,

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should I buy those or should I, you know, go with my money manager and

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just put money in the market? I'd say go with your money manager, put money in the market.

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If you say, well, my money manager is telling me to buy a RILA, then I'm saying,

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well, what are they doing? What are they doing? What's their

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strategy as far as to manage it? Because they're selling you a packaged product,

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a market packaged product with limited upside, of which you share in some of the downside.

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And the way I understand it, you're paying for levels of downside protection. The less

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downside that you share in, I think you have to pay more. I think it's on that

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kind of sliding scale. I certainly am not well-versed in RILAs because I would

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never sell one. Okay. But I do know about them just because there's a lot

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of them being sold out there and a lot of people being convinced to buy them.

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I really believe that RILAs are now kind of overtaking that variable annuity space.

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Remember the variable annuities, which were in essence mutual funds — for whatever reason the

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industry called them separate accounts— mutual funds wrapped with an insurance wrapper cost

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you about 2½ to 3% annually for the right to choose from those limited mutual fund choices.

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But I think RILAs are taking the market segment away, that percentage, from variable annuities.

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My opinion, it's a sexier sell. Upside with limited downside. Anytime someone says that,

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that sounds fantastic, right? I can get your market up, market growth, and protect the

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principal. Okay, that sounds great. Does it work? That's where the rubber meets the road, right?

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For us, index annuities, we love them to deliver the income rider guarantee. As a standalone,

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you're better off buying a MYGA, a multi-year guarantee annuity with

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a guaranteed interest rate. Historically, you're better off buying a MYGA, my opinion.

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But RILAs versus index annuities, if you said, “Which one would you buy?”

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I'd say neither. Just go try to get market growth. But if you said, “Well, but yeah,

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but I want lifetime income.” Okay, great. Now we're not talking about

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that anymore. Now we're talking about lifetime income guarantees.

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Remember, there's two questions. What do you want

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the money to contractually do? When do you want those contractual guarantees to start?

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There's also an acronym we use called PILL that solves for what annuities solve for:

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principal protection, income for life, legacy, and long-term care.

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There's no G for growth. There's no M for market, and there never will be.

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Don't get fancy. Don't try to thread the needle. Don't think that you're buying

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this product that your neighbor never heard of and you're one-upping them. Maybe in the

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future there will be these products that I love so much that I have to sell them. Right now,

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having looked at them, no, I'm going to stick with the CGO, contractual guarantees only.

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I've written a book on index annuities. You can download it for free if you read it. It's similar,

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eerily similar to RILAs from the standpoint of just all the moving parts. There's a lot of moving

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parts with RILAs. I do think that RILAs give you a little bit more flexibility to lock in a gain,

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which I guess is good, as opposed to index annuities. But again, I call them co-pay

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annuities. You're paying for whatever limited downside you want to participate in. So, you're

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co-paying for that, and I guess you're also paying a fee for them to manage it. So, I don't get it.

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Explain it to me. Be careful out there. If it sounds too good to be true, it is every single

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time. And if someone pitches you a RILA or index annuity and you're looking for market growth,

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just ask them, why don't we just do market stuff that's fully liquid,

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no fees, and we can make as much as we want? Ain't that what the markets are for?

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With 14,000 people turning 65 every single day, you're going to see a lot more of these

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products just be created out of midair, pop up out of midair. Indexes you've never heard

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of pop out of midair because all they're doing, annuity companies, they're running an algorithm

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to look for a return. They're going to take that basket, package it, call it some unicorn XYZ index

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you'd never heard of, and then tell you if you'd owned it 10 years ago, you'd have made X. Come on.

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Retirement Chapter 2 is simple. It's all about principal protection and lifetime

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income with most people. Not all, most. And when you're looking at principal protection

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and lifetime income, it's very, very simple and it's very, very contractual.

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Do me a favor. Go to my site, run quotes 24/7, 365,

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download my owner's manuals for free. You can watch videos. I've done thousands of videos.

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And do me a favor, right above my head, click that box, and it explains how our process works,

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the application process. Everybody in the building's licensed in all 50 states. Nobody

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in the building's on commission. Now, we do get paid by the carrier, but my people

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that are going to be talking to you, they're not incentivized by commissions. They're incentivized

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by you being happy. Okay? So, that's a good thing, and that's a new thing in the business.

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So, with that being said, my name is Stan the Annuity Man. See you next time.