An indexed annuity is a variation of a fixed and variable annuity. This type of annuity is taxed-deferred and considered to be an ideal savings option for someone who is looking for something more long term. Indexed annuities allow for many opportunities for growth with protecting policy owners in the event of a down market.
Typically, an indexed annuity will monitor the market index–hence its name–such as the S&P 500. Recently, researchers and analysts have noticed that over the years, indexed annuities have evolved greatly. However, this expansion has insurance markets quite concerned. In order to compete with the versatility of indexed annuities, some insurance companies are developing their own products and investment plans for a leg up in the market.
After carefully studying these different products and investment policies, researchers have noticed that they are not nearly as transparent and understandable as standard annuity plans from reputable investment companies. Researchers also have discovered that almost all of these ‘unique’ plans don’t offer the best financial benefits as traditional market indexes do (source).
Wink Inc discovered that in a 2013 study that there were only 6 companies that offered ‘hybrid indices’(something that adds more complexity with less growth advantage) for indexed annuities. Today, that number has increased to 50. Additionally, they were able to determine that aside from the S&P 500, these indices are the second most popular with more than 30% of sales recorded in the third quarter. Some of these indices include Pimco Global Optima Index, S&P Multi-Asset Risk Control 5% Excess Return Index, and the BNP Paribas Momentum Multi-Asset 5 Index. Due to the surge in indexed annuities, the demand for hybrid indices is becoming more and more popular amongst insurance companies. Additionally, these hybrid indices offer policyholders an interest rate that will not cap, unlike its competitor.
These hybrid indices may seem enticing for someone who is looking for an investment plan yet has little knowledge of the ins and outs of it, however, it’s leaving many insurance agents uneasy. Sheryl Moore, the president and CEO of consulting firm Moore Market Intelligence, claims that any insurance agent who gives clients information on these hybrid indices are actually giving them unregistered, incorrect investment advice, which is very frowned upon in this business practice. Not only is it frowned upon, but it also can result in criminal charges, punishment fees, loss of insurance license, and even jail time depending on the state you reside in and work in. Many other insurance agents, CEOs, executive directors, etc.–not just Moore–are as equally uneasy and skeptical about this new brand of insurance. So much so, that you won’t find it at any reputable insurance agency.
If you no longer wish to continue receiving your annuity payments and would prefer a lump sum of cash, contact us. At Rising Capital Associates, you can sell your annuity payments for cash now. You can also sell your structured settlement payments for cash now as well.