Most people couldn't wait to close the books on 2008, and it will be a long time before some can look back and laugh it off.
After delivering investors a brutal 38.5% loss, 2008 stands as the worst year for the S&P 500 since 1937. The 33.8% drop in the Dow Jones was the worst drop since 1931. The Nasdaq fell 40.5%, making it the worst of the three major U.S. indices, all of which were underwater from 2007 levels for all 253 trading days.* It was the S&P 500's third-worst year, the Dow Jones' second worst, and Nasdaq's worst ever. Seven trillion dollars of market value was wiped out. That easily makes 2008 the nastiest annual decline ever experienced by most Americans.
Investors who spread their portfolios across different types of stocks and geographies were not spared. European and Asian stocks did even worse, with the Vanguard Europe Pacific ETF falling 43%. Every major stock market in the world declined.
The year 2008 reminded us that bonds are not a safe haven, either. The biggest bond fund on the market plummeted 36% last year. In short, the myth of safety in stocks and bonds was shattered.
Will Rogers phenomenon
The humorist Will Rogers once said, "I'm more concerned about the return of my money than the return on my money."
After losing a large part of their life savings in the market meltdown, many Americans learned the lesson in Will Rogers' words -- albeit too late.
Unfortunately, putting safety first now will not replace the assets that evaporated last year. So how do we help Americans whose retirement nest eggs were shattered and scrambled? Millions of prospects need a plan to replace money lost in the market meltdown of 2008.
Main street needs a bailout
Bailouts are all the rage today. It seems every big business wants the U.S. taxpayer to bail them out. The auto industry, banking industry, Wall Street and many others await the taxpayers' help.
The government seems intent to bail out big business, but who has a bailout for Main Street? How will a $1,000 tax credit help a husband and wife who lost 40% of their life savings?
Annuities are the answer
The heartbeat of our economy has always been free enterprise. I am pleased to inform you that free enterprise has done it again. If you sell fixed indexed annuities, you can be part of the solution.
New indexed annuities have been designed to provide a "personal bailout" for retirees devastated by the 2008 market meltdown.
Timing is everything. You not only need to have the right product, but you also need to bring the product to market at the right time. The time is perfect right now for new annuities with income riders.
No one knows how long it will take for the stock market to rebound from a 40% loss, but annuities with income riders can guarantee end-of-first-year growth on the Guaranteed Lifetime Income Account equal to premium plus 30%. The first-year growth on the Guaranteed Lifetime Income Account is not available on the cash surrender value. The long-term growth on the Guaranteed Lifetime Income Account means the outcome is more income for Main Street.
Some of the most innovative riders offer a guaranteed rate of growth each year, referred to as roll ups. This is an exciting new feature for indexed annuities. In addition to protecting against market losses, the income account value is guaranteed to grow even if the index is flat or goes down. However, you should point out that the income account value and income amount are not guaranteed to grow after guaranteed lifetime income payments are activated.
Turning assets into income is another opportunity to offer income riders. Many retirees have been successful at accumulating assets, but do not have a plan for turning assets into income at retirement.
Previously, the only way to guarantee annuity income for life was to annuitize. Most clients like the idea of receiving an income guaranteed for life, but may dislike giving up control of their lump sum.
Consumer-driven income riders provide guaranteed lifetime income, while allowing the client to retain complete control of his or her lump sum. The client's beneficiaries also receive any remaining account value at death. Now you can have your cake and eat it, too.
Fee benefit vs. free benefit
Let me offer a word of caution regarding income riders: Most riders available at the time of this writing deduct an annual fee for these benefits. Income riders that charge an annual fee may pose significant problems. These fees are listed on the anniversary statements that clients receive every year.
What happens in a year when the index return is zero because the market is down? The fees are deducted every year even if the index return is zero, so the account value will decrease in a year when the market is down.
That's when phone calls from unhappy clients will begin. Clients will ask why they lost money last year. They will insist that protecting their money when the market goes down was one of the primary reasons they bought an indexed annuity.
Advisors who sold those annuities that charge fees will have to remind dissatisfied customers that they added optional features to their annuity and those optional features are paid for every year.
How much money do you make when taking a call similar to this one? Zero. The more time you spend taking calls from unhappy customers, the less time you spend selling and making new commissions.
Fortunately, not all the income riders charge fees. You can get the biggest income bonuses and the biggest benefits at zero cost!
Indexed sales will shine in 2009
Advisors selling indexed annuities can thrive this year while others struggle just to survive. These hot new income riders present opportunities to earn new sales by solving new problems.
Whether it's a personal bailout, protecting assets from market losses, or turning assets into income, you are uniquely positioned to provide the solutions your clients need.
Millions of Americans have questions regarding their life savings. You have answers. Embrace this opportunity to help others and your sales will definitely not decline in 2009.
Ron W. Rawlings is principal and founder of Dallas-based Dallas Financial Wholesalers, an independent marketing organization which distributes annuities, life insurance and long-term care insurance to personal producing general agents, financial planners, broker dealers, banks and credit unions.
*2008 data from USA Today 01/02/09
