Finding the Best Annuities Advisor
The best annuities advisor for most investors is likely the one who has significant training and experience with insurance and financial products. An experienced advisor can take a “holistic” approach that is unique for each client. As annuities are financial products sold by insurance companies, it’s important to work with an annuities advisor who understands how annuities will fit into an individual investor’s overall portfolio.
If the investor does not currently have life insurance, the advisor may discuss annuities that provide a death benefit. If the investor does not have any assets in the equities market, the advisor may recommend variable or index annuities to take advantage of the long-term growth potential. He or she may also suggest annuities that will boost an investor’s ability to save money for retirement.
Agents and Brokers
Life insurance agents must be licensed by the state in which they sell insurance products. If the agent also sells variable annuities, he or she must be licensed by the Securities and Exchange Commission (SEC) and be registered with the National Association of Securities Dealers (NASD) and the Financial Industry Regulation Authority (FINRA).
The best annuities advisor is almost always one who is a Certified Financial Planner (CFP) or Registered Investment Advisor (RIA). A Certified Financial Planner or Registered Investment Advisor has a fiduciary responsibility to his or her clients. Simply put, this means that he or she has a legal responsibility to put a client’s needs ahead of his or her own. Compensation, therefore, will most likely be in the form of an hourly fee or retainer and not in the form of a commission.
Life insurance agents and stockbrokers who are not CFPs do not have a fiduciary responsibility to their clients. They follow what is known as the “suitability” standard. They must only ensure that a client is “suited” for a particular investment. They are most likely compensated through commissions that are paid by the companies whose products they sell. Therefore, it is always possible that a conflict of interest may arise.
How to Get the Best Annuities Rates
The best annuities rates are those that adequately reflect risk and reward for the insurance company and the investor. The risk to the insurance company is that in today’s highly competitive financial services environment, it must usually guarantee at least some part of the annuity contract. Some companies will guarantee lifetime income and others will guarantee that the principal will not fall below a certain level. Even if the underlying investments go down in value, the insurance company will still be required to make the payouts for the duration of the contract, at the rate it is legally obligated to pay.
The risk to annuity investors is the length of the contract and the risk of potential loss. Even though a return may be guaranteed, an investor risks “losing” money if the rate is lower than he or she could achieve with another investment. And with products such as variable annuities, it’s possible that gains that have taken years to grow can be lost within a matter of months if the underlying investments lose value.
Finding the Best Index Annuities
The best index annuities are those that offer either guaranteed income or less risk of loss than an index mutual fund. It’s also wise for investors to make sure that their investments in equities are diversified enough so that they do not have all of their money in one or two investment classes. If an investor already has a significant portion of his or her assets in equities, a fixed annuity may be a better choice.
Because index annuities are a hybrid of fixed and variable annuities, they can often fill a gap in an investor’s portfolio. They offer the relative security of fixed annuities while at the same time offering the growth potential of variable annuities. The insurance company compensates for this by only crediting the return to a portion of the total account value. However, a guaranteed payout and reduced risk are often a good combination for a retirement portfolio.
Best Annuities for Fixed Income
Immediate fixed annuities pay a guaranteed monthly rate for as long as the investor chooses. If he or she chooses to be paid for 20 months, the amount of each monthly payout will be based on the size of the annuity. If he or she chooses to be paid for life, the amount of each payout will be based on his or her life expectancy as indicated in an annuity actuarial chart.
There are a number of additional products that can be added to a fixed annuity, but they will reduce the rate that is paid each month. For example, investors can purchase a joint annuity that will pay both spouses until they die. A cost of living adjustment (COLA) can be added to ensure that the amount paid is increased each year to cover the increases in inflation. Or, an investor can make sure that any premium that is not returned to him or her as part of the monthly payouts is provided to a beneficiary is he or she dies before the entire amount is returned. While all of these options serve a purpose that may be beneficial for an investor, each will reduce the amount paid out each month.
Best Annuities for Equity Investors
The best annuities for those who wish to invest in equities are variable annuities. The premium paid by an investor for a variable annuity is invested in mutual funds as directed by the investor. If he or she is interested in aggressive growth, the insurance company will usually provide a number of funds from which to choose. If he or she prefers conservative growth, there will be a number of these from which to choose as well.
A major advantage of the best variable annuities is that the principal, or the amount of the original premium, is usually guaranteed. However, any gains that are credited to the account while the market increases can be lost if the market goes down.
Don't make the rookie's mistakes of going it alone. Professional help is a MUST given the nuances of annuity products. For free help, advice, and actual product comparisons, get in touch with a qualified financial advisor right now!