providing certainty for your clients’ income needs dial in for audio: 1-877-273-4202 access code:...
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Providing Certainty for Your Clients’ Income Needs
Dial in For Audio: 1-877-273-4202Access Code: 9669134
Identifying the Best Income Riders Available Today
What We Will Accomplish
• Open your awareness about income riders
• Compare the marketplace to identify what are
the best options available
• Review details of the best options
• Share discovery dialogue that works
• Answer your questions
Make the Next 45 Minutes Beneficial
Two Lists
Information without action is like buying a present you never give!
• People to call
• Tasks to do
Be Open-Minded
When presented new information …
how do we come to a conclusion?
Have you ever thought about how you
are thinking?
Don’t allow assumptions to go
unchecked – confirm and verify
What Once Was
Significant changes in the VA space over the
last 5 years?
• Higher fees
• Reduced benefits
• More restrictions on investments
• Fewer carriers
• Lower withdrawal percentages
• No more joint income
What is Now
Significant changes in the Equity Index
Annuity space over the last 5 years
• Income riders are the same or better than VAs offer
• 5% & 6% compounded roll ups
• 7% & 8% simple roll ups
• Income withdrawal percentages from 5% to 6.25%
• Nursing home income enhancements (state specific)
• Joint income available
Paradigm Shift
Here is my story • Allowed incorrect assumptions to draw conclusions
• Income riders comparable• Caps are low so that means that the VA will win out
over time and produce more income later• The spread between VA performance and the EIA
cap is too wide• Conclusion – for future income VAs are better than
EIAs• Put EIAs in a box – clients who wants certainty about
future income and cannot deal with volatility• Case study to do the math and learn what works best.
Director of Annuity Marketing
Over 20 years experience
MBA, FLMI and CRPS
Varied experience … home office,
advanced support and personal
production
Jamie Farmer
Case Study
A 60 year old client is considering a Variable Annuity as part of his retirement plan.
He decides to invest $100,000 with the goal of turning on lifetime income at his age 70. A typical VA might offer as high as 6% compounded roll-up to his withdrawal base or 7% simple roll-up and 5% lifetime income once income is turned on.
At age 70, he is guaranteed a minimum lifetime income of $8,500 - $8,954 annually. He is told, “If the markets perform well, income could be higher but, never less.”
The EIA Alternative
An alternative to consider is an EIA. The income benefits guaranteed under an EIA usually beat the guarantees offered under a VA.
A typical EIA offers a similar 5% compound roll-up to his withdrawal base or as high as 8% compound but, guaranteed income percentages are generally much higher, ranging from 5.50% - 6.25%.
At age 70, if using an EIA, he is guaranteed a minimum lifetime income of $8,954 - $11,000.
The income guaranteed under an EIA can be as much as 22% higher than the VA!
Under Guarantees - Which is More?
VA = $8,954
EIA = $11,000
But What About the Caps?
The VA offers the potential of higher income if the markets perform well but, their ability to perform is oftenhandcuffed by various investment restrictions and an average 3.50% internal expenses (1.30% M&E; 1.20% RiderFee; 1.00% Investment Management Fees).
In our case study, for the VA to match the guaranteed$11,000 annual income offered by the EIA, the VA would have to experience 11.70% gross annualizedreturns for each of the 10 years the client intends to defer to grow to $220,000 (5% x $220,000 = $11,000)
Summarize
EIA produces 22% more income than the VA under guarantees
For the VA to equal the guaranteed outcome of the EIA … the VA must produce a gross 11.7% annualized ROR for the 10 year deferral
EIA Options to Consider
Income Begins Age 70 Carrier/Product
Premium Bonus Roll-up %
Withdrawal Base with 10 Years Deferral
Single Life Income Percentage Annual Income Nursing Home
Allianz MasterDex X 5.00% 6% Simple $165,000 5.50% $9,075 N/A
American General Choice Index 10 4.00% 7% Simple $200,000 5.50% $11,000 N/A
AVIVA Income Select 6 & 10 0.00% 6% Compound $179,084 5.25% $9,401 $18,802
Genworth SecureLiving 7 & 10 *0.00% 8% Simple $180,000 5.50% $9,900 N/A
ING Secure Index 5 & 7 0.00% 6% Compound $179,084 5.00% $8,954 N/A
ING Secure Index Opportunities Plus 5.00% 6% Compound $188,039 5.00% $9,402 N/A
Lincoln ND 6 & 8 ; OptiChoice 5, 7 & 9 0.00% 5% Compound $162,889 6.25% $10,181 $16,289
Lincoln Opti Point 10 4.00% 5% Compound $169,405 5.85% $9,910 $16,940
Lincoln Opti Point 8 3.00% 5% Compound $167,776 5.85% $9,815 $16,777
North American 0.00% 6.50% Compound $187,714 5.25% $9,855 N/A
Additional Points & EIA Benefits
• VAs still have a place – not to be an argument against • Limited investment options make hurdle harder
• We filter the products to meet your broker dealer’s requirements (10/10/10 guidelines)
• Still must be compliance approved• Caps are moving up … Genworth is approaching 6%• Income now – 5% and more – even for joint life• Seeing more “split” cases• Can’t deny the math – your competition knows about
this• EIA offers ROP• Share the story with clients allow them to choose• A way to lower beta in an AUM portfolio due to ROP
feature and guaranteed future income
What to Ask?
When you think about the income you will be wanting in the future … how much would you like to have guaranteed?
How would you feel if we could smooth out the ups and downs of your portfolio and provide you more certainty about your future income?
How to Access Our Support?
Next Steps
•Call your CORE RM
•Review Lists
•People to call
•Tasks to do
C.O.R.E. is an Independent Marketing Organization distributing life
insurance, annuity, long term care & disability solutions for the independent financial advisor.
We align with you to reduce complexity, optimize outcomes,
enhance relationships, increase profitability and create certainty
for you and your clients.
Who We Are
We are your risk management solutions team
Thank you!
We create certainty through alignment
