With the current interest rate environment, it’s hard to get by on “just rate.” This isn’t 2007 or 2008. With that said, rates on fixed annuities are competitive and a good investment in comparison to other fixed alternatives. The features found in an annuity only increase their value and separate them from the other fixed alternatives.
We believe there’s a 3-pronged approach to ensuring your producers are presenting annuities confidently to their clients & prospects:
1. Everything is Relative
Fixed Annuities have a good return compared to the other options that a client has for parking their funds. As of Friday, the highest yielding CD in the country offered 1.46 % for 5 years, and the average yielding money market was about 15bps (bankrate.com). Fixed Annuities are very competitive given what the market is bearing right now. Remember to use www.bankrate.com as a tool.
2. The Cost of Waiting
Clients are giving up a lot of money waiting for rates to go up. History tells us that rates go up gradually- They most likely won’t double in 12 months. With the 10 yr treasury closing at 2.19% on Friday the 26th, now is the time to take advantage of higher yielding products that offer liquidity. The client’s money is put to work now, and there’s a hedge built-in if rates do move up quickly. Compared to the average yielding jumbo CD, a client is giving up more than $1,500 per year per $100,000 by not taking advantage of a 3% fixed annuity(Rate Saver 7 yr 100k).
3. Use an Illustration
An illustration is a graphical way to show a client that their money in a fixed annuity is always growing. The majority of the population learns & understands by seeing something visual. The illustration re-enforces that your money is growing, and it gives an agent the ability to explain all of the features of the annuity.Clients should be looking at rate as only 1 feature of an annuity and having their agent help them answer “What am I getting for that rate?”
Fixed Annuities can be a great fit in any rate environment if you sell features, use visuals (illustration), and confidently convey how the product fits in a client’s overall portfolio.