1- Fixed annuities are exactly that, fixed. They do what the contract say and earn the interest rate in the contract. You can’t lose money with a fixed annuity. We write these when appropriate to the client.
2- Indexed annuities are tied to a market index such as the S & P 500 or Barkley’s or a foreign market index.
There are different kinds of indexed annuities. At CWT Consulting we only write FIA’s Fixed Indexed Annuities are tied to a market index and participate with the gains but NOT the losses.
You may have heard the term, PAR rate. That’s the rate of participation.
IE: If you have a $100,000 FIA and the market index it’s tied to goes up 10% then you think you have $110,000
However, the participation rate is only 50% so you have $105,000. On the other hand, if the market drops next year by 10% you still have $105,000.
At CWT Consulting we shop for the best par rate that suits your needs.
Opting out of an up front bonus and agreeing to a longer term, instead of 5 years, 7 or 10 years, then you may have a PAR rate that is above 100% there are a few out there at 200% but aren’t suitable for most clients.
Notice that we use the term clients instead of investors. Only financial planners with SEC, Securities and Exchange licenses may use that term, Well it’s your money so you can.
3- Variable annuities can only be sold by agents holding SEC licensing. NOTE: your principal AND interest are at risk with a variable annuity as the funds are IN the market and subject to its volitivity.
Another term we must use is suitability. We can’t write a policy or contract that uses money that you need to live. A suitability questionnaire asks specific questions about your income and sources of funds as well as your expenses etc.
This is why we say we write what’s right for you, there’s a lot involved. We’re not selling anything but concepts!
It’s still your money. When you see that a plan that we put together fits your specific needs then you say, ‘That’s what I want to do.’ And then we write the policy/contract.