Don't the words new and improved go together?

This bird is baffled. Without publishing any names, I was really looking forward to a certain fixed index annuity (FIA) coming to market. The insurer in question is of the highest quality and offers some of the best consumer products in all the land. However, this time the company has chosen a different path. This quality insurer has decided to sell some of the lowest index rates I have ever witnessed. At the same time, the product pays one of the highest commission rates available in this state.

Usually when interest rates are low, the first to fall are the interest yields consumers earn. When rates stay low, the agent commission rates will drop because insurers need to keep the product available for sale. I like to say that yields fall from small events and commission drops from large events. But I have never seen a new product launched with a horrible index rate and combined with very aggressive commission rates. What does this tell you?

Insurers cater first and foremost to the selling agent while the consumer comes in a distant second. In my opinion, commission levels determine sales in the FIA market. I don’t really see this in the variable, fixed and immediate (income) annuity product lines. Until the consumer can wise up and do their own product research, FIA’s will continue to treat the agent as King.

Keep in mind that this doesn’t apply to all FIA products and agents. But there is something wrong here.

Summary: When a quality company like this offers an inferior product you must conclude that the sales process needs to be changed.

Conclusion: Do your own research.

What a wonderful little article on Amercian Equity in Best’s Review magazine. Best’s Review is a periodical put out by the insurance company rating service. It mentions the down-home-happy-meetings American Equity management is sponsoring to existing policyholders. It’s like their very own road show. Aww, how nice of them! I guess they have meetings because the company and the client will be together for a long time; about 16 years when it comes to their hot selling Bonus Gold annuity. Can you believe that Best Review lists the Bonus Annuity as the #2 selling FIA in the country! How can a 16 year FIA be such a big seller? Read above for the answer.

Above all, know the difference between items that are sold versus those that are bought. Fixed index annuities are sold and controlled by the agents, compared to immediate annuities that are bought and controlled by the consumer.

Pay It Forward

I’m certainly not a motor bird, but I have to offer a used car suggestion for your post-graduate. Convince your son or daughter to purchase a used diesel auto like a few of the Volkswagen models. Diesel engine cars can last for a half a million miles or more and they get higher gas miles per gallon of gas. They could keep the car until they’re thirty! Be an auto contrarian and go with a diesel.

Earl E Bird

I'm Earl E. Bird and I am very concerned about saving for my senior years. I am amazed at the stumbling blocks that exist when saving for retirement. That's why I take my time when making decisions on building my nest egg.

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