Flexible Premium FIA (finally a good one)
To learn about the FIA discussed in this newsletter, click on the following link:
When most advisors sell FIAs (Fixed Indexed Annuities) they do so using what most in the industry call “single pay products.”
What is a single pay product? It’s one that only accepts premium payments one time.
In other words, if the client wants to pay a new premium into the product in year 2, 5, 10, etc. that is not allowed and the client would have to buy another single pay product.
What’s the big deal? If the client buys a new FIA in year two instead of paying more premium into the one they currently own, they get a new surrender charge schedule for the new FIA (and would for every future year they bought a new product).
Aren’t most FIAs flexible premium? Nope. Most products are NOT flexible premium.
Most of the flexible premium FIAs are sold in the 403(b) market to teachers who fund on a consistent basis through payroll deduction. As a general statement, 403(b) flex products are not as good as most single pay products (lower bonuses (if any), lower caps, lower commission paid to agents, etc.).
Who buys single pay FIAs? Generally speaking older clients, many of whom are near or already in retirement.
Why don’t younger clients buy single pay FIAs? (By younger I mean ages 45-55).
1) Many don’t have a big lump sum to fund them.
2) Younger clients have many years of growth in front of them and many would prefer not to use a product that has capped growth (even if there is no risk of loss)
Why would younger clients buy a flex product?
1) Because they have X amount of money to fund an annuity each year, but again, they don’t have a big lump sum.
2) They want a product with:
–Good potential for growth over time.
-A guaranteed income for life rider as an option (one that rolls up for at least 15 years).
3) Because they don’t like or are not candidates to build wealth with cash value life.
Finally a good flex product
A really good flex product does exist. It’s one I’ve been talking about in my recent newsletters:
The flex product I’m referring to isn’t so much of a flex product, but just a really good FIA that happens to allow for flex premiums. The product has the following traits:
-It has some of the highest caps in the industry.
-It has one of the best guaranteed income riders.
-And it pays commissions on new premiums (not just on year one premiums).
The last bullet point is the one that gets many agents’ attention. As I stated, most flex products do not pay good compensation. This one does and it pays it for a period of years when the client continues to fund.