The fixed indexed annuity (FIA) has undergone many facelifts since its inception in 1995, and most of you have witnessed the transformation and evolution of this principal-protected insurance product. Some of the changes are a direct result of our regulatory environment while others reflect the insurance companies’ desire to find unique ways of crediting interest while providing maximum benefits to the client. Currently, there are numerous good insurance companies offering a smorgasbord of competitive products, and with approximately $35 billion of annual sales in 2010 and 2011, lack of product is not the issue — rather it’s product selection. How do you the producer determine which products fit into your practice and your clients’ plans for retirement?
First, it’s important to understand what’s currently on the market, and then ask yourself what features and benefits are important to those you serve. At the top of your shopping list you may want to consider looking for product that uses client-friendly features to deliver flexibility and an array of choices. Take for example the Forethought Bonus Advantage. It’s no surprise that this product is Forethought Life Insurance Company’s fastest growing product given its R.E.A.L. income and legacy planning benefits wrapped into one neat annuity package.
WHAT’S ON THE LABEL
Initially, the Bonus Advantage may look similar to other good products on the shelf. It offers the popular features of a 10-year surrender charge schedule, a lifetime income rider, an enhanced death benefit and multiple interest crediting strategies. To give it a more appealing flavor, it also includes a 5% premium bonus1, 5% compounding roll-up2 and 10% free withdrawals after the first contract year, and it’s approved in 48 states. Sounds like your product now, huh? If we position the product as it can be and identify the R.E.A.L. benefits, you’ll see a lot more than you may have now.
Required Minimum Distributions (RMDs): Do you have clients required to take RMDs but who don’t need the income? Consider showing them how to put IRA funds into this product and take RMDs yet preserve much more than the account value for their beneficiaries.
Enhanced Death Benefit: What’s better than a standard death benefit? Offer clients the ability to provide a death benefit equal to the higher income base when taken over five years.
Accelerated Income: Do you have clients who do not need or plan to take income for several years? Access the Optional Income Benefit3 to boost their annual income payout rate to 8% of the income base4 for five years if they defer taking income for the first 10.
Locked-In Benefits: What if you could guarantee a total return value for either the client or the beneficiaries? When the benefit base is incomitized and income has begun, that full income value amount is locked in as at least the minimum total payout in income AND death benefits.
THE SECRET INGREDIENTS
Let’s take a moment and focus on the “preserve-ative” component in more detail. To expand on what’s stated above, your clients and their beneficiaries will know exactly what they are going to receive whether it’s upon death or as an income stream. Specifically, the income base can be taken as a death benefit over five years. There is a growing sentiment that the income account values are only valuable when income is actually triggered. But with this product, we know exactly what the beneficiary will receive, preserved (or locked in), regardless of whether income is triggered or not. If income is triggered, there is still the potential of beneficiaries receiving a death benefit in addition to the income already taken by the client, as shown in the chart below.
This might seem elementary, but not every annuity on the market offers this type of featured ingredient. It all goes back to providing clients with flexibility because, in a 10-year time span, the goals and objectives of one’s retirement assets can change dramatically.
In addition to the benefits listed above, other key ingredients that make the Bonus Advantage a multi-dimensional product applicable in many client scenarios are some that can easily be overlooked. Forethought is a U.S.-based carrier with an A- rating from both AM Best and S&P5. Clients can put up to $1 million of premium into the product, and Forethought accepts premium from in-service distributions and IRA rollovers to make this exciting product as appealing as possible. For you the agent, the carrier offers very competitive producer compensation.
Obviously, every client situation and scenario is different, and there is no such thing as a one-size-fits-all solution when it comes to product selection. However, if you have younger clients who don’t need to take income right away or those looking for a way to turn their RMDs into a meaningful legacy, the R.E.A.L. “preserve-atives” that spice up this product could be just what they need to achieve their retirement goals. Contact your Annuity Sales Consultant for product information and access to an online product toolkit, and consider putting the Bonus Advantage on your shelf for clients.