Episode Transcript
[00:00:00] Hello and welcome everybody to the Annuity Straight Talk podcast, episode number 193. My name is Brian Anderson, founder and creator of this wonderful website. Enjoying the last few days of summer in Western Montana. It's been gorgeous. Good enough rain, not too hot, but plenty of very fair weather. Cool nights. We got cool nights here, which is a really nice thing about that's why everybody likes coming here. Please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Send it to a friend who you think might benefit from this or anybody you think might have a bone to pick. I love critique. I love to get my skills sharpened. And being challenged is one good way to do that. Top right corner of any page on annuitystraighttalk.com if you want to make an appointment with me and get on my calendar to talk about specific situations for you, get your problem solved. No bs, no pressure. That's up to you. Last week we talked about the bonus annuity and the big first year rate when you combine the bonus with the fixed rate. And I wanted to be clear to talk about the specific situations where it might be applicable. It is not something I never really liked those products that people try to sell to everyone they see because it's just not appropriate. It's certain places had some good feedback on that. A couple of questions. If you went through the whole thing, then you'd understand the premise of it. It's a really good deal if you fit one of those criteria. At the end, I think there were three or four of them. And this is going to show you a real world case study of a guy who did something with that product last year, although he didn't take the fixed rate. So I'm going to talk to you guys about that. And he got an excellent return on his first year in the bonus annuity. And I'm going to talk a little bit more about the product itself. Most people who get a chance to look at index annuities have seen some pretty astronomical illustrations. I'm not a big fan of that. It's probably prevented me from selling more product because I'm not going to hype it up. I like mygas too. I know where they fit. Compared to index annuities, a lot of people jump straight to that. And if it cost me sales that would have led to maybe a disappointed client who didn't get the double digit returns that I illustrated, then I'm okay with that because I don't want to have contention and I don't want to have poor relationships Setting expectations where they don't belong. But the point of an index annuity is to beat a fixed rate or a MYGA multi year guaranteed annuity. If the Myga is paying 5, 5.5% and you choose the index annuities instead of. You like the protected downside, but you want to take a shot at making more, it's possible to do that. But some people are settled for that fixed rate. The most reasonable comparison to other investments is bonds. Safe money market stuff like that. If you're considering secure options. If you want less volatility than the stock market, you need to understand you'll likely receive less yield over time. But without the potential losses. You just don't want to go up and down those people that are okay, hey, things are bad, but we stayed level. Been a couple times in the past year the markets kept rallying back, but that bottom line for a lot of people just kept them feel comfortable about it and they didn't have to worry about those things. So everybody that's considering annuities where it's relevant, if you're in your 50s, 60s, 70s, everybody's seen a time where the market chopped sideways for a couple years. 2008, NASDAQ didn't come back for eight years. So it's not always going to be as simple as this. And then if you get somebody who's been in the advisory world for less than 10 or 12 years, 15 years, they haven't really seen any long lasting damage where that took real skill to navigate those spots and markets to do that.
[00:03:28] So I started this career right after one of those times. It happened five years into it and we dealt with that again from 2008 to 2016. We dealt with some really serious concerns about the market, ups and downs, things like that. But I'm not going to sell index annuities to say they will beat the market. A lot of guys do it and I think they're biased toward their own commission. Whatever it is. Just trying to get you to hey, warm me up and get you to slide over. Hey, take that deal. Gonna go in a series next couple of episodes. We're gonna talk about some of those sales pressures as well. Again, after the sales pitch that I talked about last weekend, it's something you'll see a lot throughout the industry. I think it's fair that I be the one to tell you, explain to you where it's applicable as well. Bob, my good buddy in Indiana. Hey Bob.
[00:04:13] He called me, saw the title, think he was walking his dog.
[00:04:16] And we see Things the same way, have the same frustrations, appreciate the asset class for what it is.
[00:04:23] And Bob calls. Man, I was afraid you went to the dark side on that. But I tried to do a good job of like staying middle ground as well. So anybody that does it here is going to get a better education here than anywhere else, and you're going to get a good plan to go with it. So I'm all about education, disclosure and all that stuff, so you're going to know what you get into before you sign anything. Now, that idea actually came to me because I have a client who did it last year. I've had a few people who've done this, and he did it for different reasons. I talked about surrendering an annuity, but when I got through the first year of his contract, I saw the results and I'm like, wow, that's a really cool turn of events considering where he was when I met him last year. It wasn't a crazy index, astronomical return, just an indexed annuity that was doing what it was supposed to do. So he had a couple of annuities purchased four or five years ago or so. Rates were low. He had riders he didn't need, paid in fees that he didn't want. I remember he told me once, he's like, man, I made 2,500 bucks and they charged me 1500 for this rider I didn't need. He's leaving the money to his kids, doesn't need to touch it, doesn't need an income rider, doesn't need any of the enhancements, all that stuff, just safe money. But it's still like I looked and saw, he wasn't in a great position, had five or six years left to go on these surrender schedules. And it like, it still makes me a little bit nervous. I want to make sure that because he's obviously sitting with a product he's not happy about starting all over again. You got to do it right and you to do it by the book. Disclose everything, Tell him the good and the bad. He knew a lot of the downsides of it because he'd been stuck in a low rate product. But when we do the paper, we got to stay within regulations. We'll disclose everything. Yes, we're replacing it. Here's why. Here's a comparison. And again, the insurance company gets a chance to say if they accept it, that takes the liability off me as well. When it all works out the way it did, extra confirmation is done, right? I talked to him right before I went to record this, talked about his allocations for the next year told him he's going to be a star. We're going to talk about this but mostly I'm happy for him that he feels confident he made a good decision.
[00:06:14] Happy to share the success with him, but mostly just happy for him. So Dan was referred to me by his son Dan and not only do both junior and senior have the same name, Hi guys. If you're listening to this, they also sound similar on the phone.
[00:06:27] I get them mixed up from time to time. But I think I got it figured out and it's never anything too serious. Dan Sr. Had a couple of index annuities that he bought when rates were low and hadn't done very well. He wanted to see if he can improve the outlook for a chunk of money he is planning to leave his kids. Surrender charge charges are obviously involved so we have to follow the rules. A bonus annuity is required to offset losses so we have more rules to follow and want to do it right. I talked about the guidelines for surrendering annuities. Might link it again here, but I linked it last week when I talked about this in first place. Both of his contracts at the time had a combined cash value of about $410,000 and a surrender value of $381,000. So he's going to lose close to 30k to get started. If someone's going to lose that kind of money, I'm going to take that very seriously. I got to recommend things that I also want to work with, work on an answer for in the years to come. In this case the index builder from Midland National. It's a product I mentioned last week has an initial bonus of 14%. It's the best true bonus contract in my opinion would bring his starting cash value up to 430,000.
[00:07:27] So it's got to be an immediate benefit, more cash going, he'd be ahead from the get go and also run with cap and participations more than twice as high as his current contract. So he didn't have much potential where he was. He's got more potential now, doesn't plan on using the money and only wants to keep it safe and grow it. So he went with this option. Another part of this is that the previous agent hadn't been in regular contact with Dan. So it's my responsibility to make sure that he gets a better experience in the future. I've talked to him twice since his anniversary date. Want him to know he can call me anytime.
[00:07:59] So I smiled when I got the statement a couple Weeks ago. It's kind of like, yeah, we did it. He made a good decision a year ago and was handsomely rewarded for it. He added some time to a surrender schedule by starting over, but his total cash value was increased by nearly 20% to over $456,000. That is the first important metric, but in comparison to what he surrendered, it's even more dramatic. The previous cash value was around 410 and he increased more than 10% from that. Given the growth potential of the previous contracts, it would have taken him at least four years of maximum performance to do the same thing. So he's well ahead of the game now and swapping to the new contract will prove to be a valuable move. It already has and will continue to do so. Pretty simple and easy. We're just making rational decisions, protecting money and getting the most growth that we possibly can. I'd say we did it. In this case, almost 20%, up from 381 to 456. That's a heck of a deal. The index builder from Midland national, again, in my opinion, is the best bonus annuity available. The company is rated A plus and customer service is exceptional, although you don't have to worry about that if you work with the right advisor. I take care of that for everybody that works with me. So currently the Bonus is at 14%, credited immediately to the contract. Had some questions about that. When do I get it? You get it right off the bat. And you can get up to 21% if you want to pay for additional benefits that include a 20% free withdrawal if you didn't take 10% the year before. So it's cumulative. There's another way to do that if you don't want to pay the fee and there's a return of premium after the fourth contract year starting in year five. If you decide it didn't work for you, you can weigh the surrender charges, get your premium plus interest back, and get out of it. So that's one reason why I had one person buy. It's like, well, if I change my mind or if something better comes up, maybe I'll take that out after the fourth year. I've always felt that it's not worth paying the fee. But like I said, a couple people found that one of those benefits was worth the extra money, so they took the extra bonus. They'll pay the fee and see as it goes on. So cap and participation rates on the S&P 500, NASDAQ 100 and other blended indexes are right in line with other competitive bonus products. So key features related to stuff like the free withdrawal provisions, like Athene's got a big bonus annuity, but you have to have the big bonus and you have to pay a fee if you want 10% in one year and then cumulative 20 if you didn't take the year before. But if you don't take that bonus, you only get 5% free withdrawal. So in this one you can still get 14 and take a 10% free withdrawal. But there's little differences in this and the rates might be slightly different, but all in all it's about the same and you get a solid private company, exceptional financial strength and all that. If you're considering a bonus annuity for any of the advantages I've mentioned in the past couple of weeks, get on my calendar. You want to talk some specific specifics? We can certainly do that. So this is a good example real life case study. I thought about doing a screenshot. I just didn't do it. I have to pull actually a screenshot. I can't just redact it because they're protected documents. Take my word for it. And if you want your own, you'll get to see it in real life. So give me a call and we can do that for you guys. Thanks so much. Just wanted to give you a report of one client who's happy, who made a good move and was rewarded for it. This has been episode 1 93. Excellent return on a bonus annuity. That's what they're meant to do. We Hope to average 4 or 5% along the way. And then with that bonus on top of it, he's going to be in really good position and his kids will be happy. So his son's already a client too. Who knows, I might be dealing with that annuity for a long time. If he just leaves it to the kids. We'll see. I will always do what's best for them, first generation and next. But thank you for joining me. Like subscribe or comment on any of your favorite podcast platforms or on YouTube. Send it to a friend or a critic who you want to look at this and challenge me on any of the points that I mention. I'm excited to talk about the next couple of case studies I have about sales tactics. That's going to be episode 194, number 95. We'll start with 194 next week. I appreciate you guys joining me and I'll see you there. Okay, thanks. Bye.
