Why Is An Equity Indexed Annuity Considered To Be Fixed?

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Hi there, Stan the Annuity Man, America's annuity agent,

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licensed in all 50 states and Puerto Rico, which is good. We now have a Spanish division

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at the annuity man. Today's question is a good one. Why is an equity indexed annuity

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fixed? Why is that, Stan the Annuity Man? Of course you know, don't you? Well, read

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my t-shirt. Of course I know. Stan knows. I know. We're going to go over that in detail after this.

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So, why is an equity indexed annuity, also called a fixed index annuity, considered to be fixed? How

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about — get ready for the answer — because it is. It's a fixed index annuity.

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Index annuities were developed and introduced in 1995. Yes,

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I was there. I looked even more vibrant than I do right now. And they were developed and put on

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the planet to compete with CD returns. Let me say it again. CD returns, not market returns.

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One of the reasons that the industry changed the name from equity index annuity to fixed index

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annuity is because there's nothing to do with equity. Okay, that, that was misleading. Give

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you an example. A fixed index annuity — that's why it's called fixed — because it's fixed and issued

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at the state level. It's not a security. It's a life insurance product. A fixed index annuity,

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formerly called an equity index annuity, is a life insurance product that's issued at the state

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level. It takes a life insurance license at the state level to sell and recommend it. It is not

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a security. When you talk about markets, market upside, that type of market participation

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that a lot of agents say, and they don't know they shouldn't be saying that — in order to say

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that legally, you have to have a securities license or be a registered investment advisor.

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95% — I'm assuming, guessing — of agent Johnny Appleseed agents out there have a life

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insurance license. The annuity man — we have life insurance licenses in all 50 states and

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Puerto Rico. We do sell fixed annuities. There's many different types of fixed annuities. MYGAs,

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the annuity industry version of a CD, SPIAs, DIAs, QLACs, which are income products, income

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riders that are attached to index annuities — but all of those require a life insurance license at

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the state level because they're fixed. And the industry was — agents were so excited because most

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agents — no offense to agents here, just calm down when I say this — most of them cannot pass

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or could never pass a Series 7 exam in their lifetime. Now, I worked for Morgan Stanley,

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Dean Witter, PaineWebber, UBS. Passed it, understood it — options, munis, futures,

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the whole thing. Understood. Did it for a while. Okay. But most agents could never, ever,

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ever, ever pass that. So what the industry wanted to do is make sure that they weren't pushing it

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as market products — these fixed index annuities. That hasn't subsided. Okay?

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The stuff that's out there — the hopes and dreams and unicorns and backtested numbers — are garbage.

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They're misleading. They're fraudulent. I really wish the industry could clean it up,

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but I'm not sure how you clean it up because the carriers will come out and say,

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"This is not a security. Please don't say market." And then they give it to the agent army,

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and the agent arm is not — no one's looking over their shoulder. They'll say anything. Okay.

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So, the example that's just so glaring to me because there's people out — I don't know about

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that, son. This guy was at this seminar, had a good filet mignon with some potatoes,

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and it was really good. That's filet mignon in North Carolina speak — and he talked about

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market upside. So, that showed this chart ratcheting up, locking in, ratcheting up,

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and all that stuff. I think it's a market return. It's not. Okay. Indexed annuities,

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fixed index annuities — there's an index option attached to, say,

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let's say the S&P 500. Okay. Now, you go, "Well, that's pretty good right there." But

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it's the S&P 500 without the dividends. And over 50% of the returns of the S&P 500, historically,

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have been attached to the dividends within the S&P 500. Okay? So, it's misleading. If 50% or more of

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the returns in the S&P 500 happen and you're buying an index annuity with an S&P 500 index

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option that doesn't include those dividends, you should at least know that going in. Okay.

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The other thing that's happening in the index annuity world — companies will create

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indices out of midair. They'll run algorithms using AI to find returns within a basket of

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stocks or investments. Then they'll package it and call it the unicorn index and then tell you,

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well, if you'd owned it 10 years ago, you would have gotten these returns. Well,

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it's only been around two months. How could I have owned it 10 years ago? That kind of nonsense needs

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to stop. I'm okay — and we probably sell more index annuities than anyone — because we only sell them

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as a delivery system for the income rider. When you've answered two questions — what

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do you want the money to contractually do? And when do you want those contractual guarantees to

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start? And you said lifetime income at a future date, then that means income rider. That means

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the income rider is going to be attached to the index annuity, of which we ignore and

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only focus on the contractual guarantees of the income rider — that lifetime income.

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So, getting back to the question, you know, why is an equity index annuity considered fixed?

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Because it is, because it's a fixed annuity, and it's so in that category that

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the annuity industry bars people — tries to prevent agents from saying the word equity

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index annuity. That's 1995 speak. They didn't know that agents were going to take that and go, "Yeah,

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I'm kind of in the markets now. You know, I got these equity index annuities." No,

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you're not. You're selling a CD product. Nothing wrong with this — principle protection. But if

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you think that you're going to get market upside with no downside, then you need to go

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check — see how many equity index annuities Jamie Dimon — where is he at? JP Morgan —

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what's he buying? What's the guy at Goldman Sachs buying? They're not buying index annuities,

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player. Okay. They're buying the market. If they want market returns, they're buying the market.

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And I recently saw one the other day. One of my team members sent me that some company's

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coming out with a, some, some index annuity tied to Bitcoin. All right, let's just stop

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right here. That's a no. Don't even email me. Or you can email me, and I can go back and you go,

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"Please wake up. Please stop drinking. Please stop." I can say that — I'm 20 years sober. So

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please, you know, if it sounds too good to be true, it is every single time. If

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you cannot explain it to a nine-year-old — no offense to nine-year-olds—never, ever buy it.

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Index annuity and now RILAs — registered index-linked annuities — same family,

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like brothers, two brothers, but brothers with promises that typically don't come true.

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Alright. Now, you might be the anomaly. I hope you are — that was convinced to buy one,

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and it works out perfectly. All the annuity planets align themselves, and you go, "Hey,

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that really worked out perfectly, Stan the annuity man." Well, then you're the person.

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Send me the statement. Send me a picture of you, and we will put you on the wall at the home office

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in Las Vegas, Nevada, as the one person where it worked out. Where it works out is when an

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income rider is attached to the index annuity, my opinion, and you're looking for lifetime income.

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So, be careful out there. And there is a reason that the word equity is not used

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with index annuities anymore because it's not a security. It's a life insurance product issued at

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the state level. Stay safe out there. Do me one favor, though. See above my head,

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there's a countdown. I know what you're saying, Stan, that is fancy. It is. But what

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that video — you need to click it. It talks about why we only focus on contractual guarantees,

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why I am the pioneer of contractual guarantees only. You own an annuity for what it will do,

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not what it might do. And the "will do" are the contractual guarantees. That video explains it

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all. Hit subscribe, put the comments in. You can even email me at [email protected]. And

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I will return that email eventually. You know, last time I did that, I got like 4,322. That's

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okay. We'll get through every single one of them because I want to make sure that you're

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making a good decision on your terms and on your time frame. My name is Stan the Annuity Man.

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See you next time.