Addressing Bank Issues And Bank Sponsored Index Strategies | 7 Figure Annuity Sales Podcast | Ep 242

On this week's episode, we're going to talk about bank issues and bank sponsored index strategies.

Everyone, this is Chad Owen, the annuity sales coach. I'm here with him.

I thought I got upgraded a couple weeks ago.

Yeah, you got downgraded.

Okay.

It's really easy for you to gain some points and then lose a whole bunch, right?

Well, I can't tell you how many times you've told me strike two when strike one and strike three have never ever happened. It's always just hovering on strike two.

That's a good point. That's a good point. I think it's, you know, we do compounded interest with us. So you're up to like 20 million so far.

Oh, I've got so many strikes.

It's not even got a lot of strikes. But see, it's one of those things where you automatically skip one because the severity of what you do, it never deserves someone.

Right.

It's always a two. Yeah. Yes.

Yeah. So that checks out.

It does check out.

It's on brand.

Yeah, well, my dad used to always tell me one. Oh crap. Wipes out a million attaboys. So I could do so many things wrong and then once I mess up, it wipes out everything. I'm like, that's not right. So anyway, how I was raised, that's why my therapy bills are so high.

Okay, so Caleb. Yes, Run with it. Bank issues, because this is probably going to be more your thing than mine because you, you geek out on this.

I do. I love this stuff. I've done some research and we're going to actually put a couple of links in the description for you to go and read these articles and notes about it. But fdic has tracked 559 bank failures so since 2000. And I think that was 2000. Actually that was 2000. I had the number written down and I wrote since 2008 because we always refer to since 2008, but that's actually since 2001. 559 bank failures since 2001.

I thought it was way more than that.

This is according to their website because.

I thought there's like 580 banks that just failed from 2007 to 2009.

There would be, because from before 2007 there was only.

22.

Oh, okay, okay, okay. So like wait a second.

Yeah, so literally 530 something of those banks, you know, from 20.

I heard before the FDIC and the reason why the FDIC was actually created was because of the number of bank failures before the fdic. It was very normal to have hundreds of bank failures a year. And so they actually had to create the regulatory organization to take care of that in the FDIC to help mitigate some of those losses for the bank holders. But once again, I talked about this in last week's episode. So because the banks risk money the way they do, you had to create an insurance.

To cover the bank's issues. And now we're not just covering the 250. They're saying, you know what, we're going to backstop these banks now, and now we're going to cover all the deposits. So literally, the banks have no liability for what's going on right now.

Hey, you know, it's one of those.

Stocks, bonds, mutual funds, commodities, banks. They're the only type that I know of, type of institution that can do this. So if you have. We live in Texas, so if you go to the coastline, you can see homes that were maybe built in the 70s and the 80s, but once a hurricane comes in and wipes those homes out, if they want to build any new homes, they have to be up to code to handle the modern storms. Otherwise you can't get insurance. The banks, the stocks, bonds, and mutual funds, they have these financial hurricanes, and they're allowed to build the same thing over and over again the exact same way and get wrecked again a couple decades later or a decade later. This just. My blood pressure is going up.

Are you saying there's a reason that fixed indexed annuities have needed very little revision over the last. Last, what, like, 400 years?

Well, let's. Let's revise that. Fixed annuities for the last, you know, since 300 years and fixed indexed annuities since the mid-90s.

So there you go.

Let's. Let's be accurate here again.

Yeah.

Sure enough, you weren't even born because.

The indexed annuity is. Is new.

Yeah. Wait a second. Were you even.

Am I younger than the fixed.

What year were you born?

96.

You are. You. You are younger than the fixed indexed annuity. 1995 is when it started. 1994. 1995 is kind of when it transitioned in. Wow, that's crazy. Yeah.

Talk about the financial golden hour. I've lived my entire life with fixed indexed annuities around.

How many annuities do you have?

I'll get my first one this year.

Okay. Actually, yeah, that. Dude, you're way ahead of the game there. That's so smart.

I'm excited.

Okay.

I want to read you guys do what?

Can I write it?

I'll sell it to myself.

No, you can't do that. Conflict of interest. You can't sell outside the organization.

Fitch, one of the main credit rating agencies like AM Best or Moody's, S and P, they've released an article about it and we're going to actually link this article in the description of the episode. But I want to read you guys one little section out of this pertaining to insurance companies amidst all the bank issues taking place. It says, Fitch Ratings initial analysis around rated US Insurers exposure to now failed banks indicates little direct exposure. So basically what they're saying is that these insurance companies, while there might be some correlation and some tie, is very minimal.

Yeah.

Okay. Rated life insurers with exposures should have sufficient capital to withstand losses and related market volatility. So if you need a quick, easy thing based on a third party credit rating agency with clients about these bank issues and how they pertain to insurance companies. There you go. You can use that. But I do want to make one note.

Can you make sure I get a copy of that?

Yes.

That just came out, right?

Oh yeah, it was like mid March that that article was released this year.

Mid March. And I'm just hearing about this now.

Yeah.

What the heck?

Did you need it before now?

You know what?

Chad hears about some of the stuff I find the same time y' all do.

You know what, that's funny. John is going to be sitting next to us next time because you're not. You're not going to be there.

I'm going to be.

That's it.

All right.

John is our producer.

Nice knowing you guys. Yeah, thanks to all my listeners out there.

I'll still write the annuity for you.

Like how I just claimed all the listeners.

Okay, we know why y' all are here.

That's really good though because I just had a client last week talk about if the insurance companies were going to be affected by the banks. Now of course I had the answer for that and I'm going, God, that would have been a good thing to have. That really would have been a good thing to have.

I'll print you the article. I'll send you the link.

Actually, I'll probably. I'll include that into our kits now. Yeah, I'll actually keep that as a separate on that. You know how the left side, I have the handouts. I'll actually do that.

If you don't know what we're talking about, you need to get into retirement realized agents academy and go download those leave behind kits. Same exact documents Chad leaves With his clients, he can download and use in yours.

And that's going to be powerful because people, for whatever reason, I don't know why. So what do the ratings companies think? Oh my gosh, we're going down this road again anyway because I mean, how many AAA rated mortgage backed securities collapsed from 2007 to 2009? Triple A rated.

Oh, I, the number. Are you asking me if I know the number? I was in third grade.

No.

You wouldn't know.

No, I wasn't in third. I was in.

But it's, it's amazing how much you know. There's an article written and I'm not going to say it's about three of the large rating companies that I think it was a Wall Street Journal called them the three blind Mice. And I was just like, that's funny. Did what? The Wall Street Journal wrote an article against the rating agencies that was quite the stir that caused. So interesting. But that's a good article. I, I am going to use that, make sure I get that one.

I mean, at the end of the day, they don't like, there's no reason for Fitch to try and say that insurance companies are somehow better off than like they're the ones that are there saying, oh no, this XYZ insurance company, you know, doesn't have the financials to support this rating. So we're going to rate them with this. It's like they don't, they're not trying to be in favor of the insurance company. So it's, it's, it's good, solid article. One thing I do want to add though is that it's important not to try to sell insurance products against banks.

For sure.

What I mean is, yeah, don't leverage bank, the bank failures and weaknesses as a means to try and sell an insurance company. It goes back again to the fdic. If the FDIC and funds covered by FDIC isn't safe, then neither is a fixed indexed annuity or a fixed annuity.

I looked at too is, you know, I don't attack brokers and bankers if they use the safe money and safe products and then they risk the other money.

Right.

You know, if they, if they protect a client's money, then I'm like, okay, great job. And then if you want to gamble the rest, go for it. And I have some really good relationship with brokers and we have a lot of agents that actually work with us that are brokers that I'm like going, hey, they understand safety and security. They allocate the necessary funds to Cover the, the income. And then if they want to use other brokerage accounts, go for it. You know, that's, that's between you and the client. But where I do get upset at that is when they use risk money to try to guaranteed income. And that never works. So you just, as a general concept, don't be bashing other institutions because all them have a purpose.

Right.

You know, except for the variable annuity. But anyway, that was. There it is.

I would even say even some commodities, man. And like I said, this is not financial advice. But I'm just like if commodities are based off of often manufacturing, for example, I think about back in the day when copper was used as the piping in all people's homes. And then you had, and I'm drawing a blanket, it's not pvc, but it's their pipe plastic piping that they use now. Now all those homes. Is it pex? I think it is pex, yeah. And then now you use that. Think about all the copper that's not being used.

Right.

And then I think if I'm correct, you used to have copper and phone lines, if I remember correctly, and now they have fiber optic. And so it was some sort of transition of energy of whatever sort it is. And it's like the demand just got hammered because it's not being used as much. So you know, when you think about what's safe and secure. And this is why we rely on the support we have from financial rating companies from asset to surplus ratios, you know, we rely on that to solidify why we want these. Correct. So this, I love this article.

Yeah, well, I'll get it to you.

I appreciate that.

One thing that I'll mention some, some actual names here because it is public knowledge, but as many of you have probably already seen, UBS is set to acquire Credit Suisse. And I know that a lot of our listeners use insurance companies, as do we, that have products where Credit Suisse index strategies were available for allocation. And I'm sure many of you have clients with policies that are currently allocated to Credit Suisse indices. So I've talked with some different insurance companies about this matter and wanted to kind of share with you guys what I found. Each insurance company is basically going to be handling things regarding this a little bit differently. But one of the things that I've seen is that some are actually going to continue to allow allocation to Credit Suisse for like another month. Oh, and then it will. New allocations will be terminated in a month, but Credit Suisse will continue to manage and report for the next two years.

Well, because from what I understand, it's not dead.

Correct.

It's just acquired and therefore by a pretty big institution. So I would imagine it's probably going to help. Could it could.

But one thing I have seen is that there will be no longer in the future Credit Swiss index strategies available with certain carriers and products. So that's one thing to bear in mind is that future allocations, they may not be available, but your current allocations there you should not see any negative impact to existing clients policies in those strategies.

See, let me, let me prove a point here. You know, and if you were to talk to agents or marketers or insurance companies about the Credit Suisse even a year ago, they would be singing the praises of that particular index.

Right.

And here's the difference. So this is a very important point. So you have agents, insurance companies.

Just singing the praises of this Credit Suisse indices saying how great it is. And here's the worst case scenario. So that index disintegrates. What's the worst case scenario for the client?

No, no movement. Yeah.

Now let's take a broker and they're in variable accounts and they recommend that index and that index implodes. What happens to that person's money?

Not good things gone.

Do you see why we have such a great product?

Yep.

I mean do you see why this is safety and security and it's just that perfect example right there. You have Bob and you have Sue. Sue picked the fixed indexed annuity, Bob picked the broker. They're both in the Swiss index. Sue's still happy now.

Right. Well, and that's.

And I could have made puppets. I would have done little puppet hands right there. And I could have tiktoked.

You have a, you have a personal affinity for puppets.

I got saved at a Baptist puppet show. Okay. So Jesus came in and convicted me through those puppets and I felt like the worst 8 year old ever out there. And I was, I was not a good 8 year old. I was not a good kid. But you know what? That puppet spoke directly to my heart. I believe it anyway. So yes, I love puppets.

So it is important to remember that not only are client accounts not invested into the index strategies, neither is the insurance company. So the insurance company goes through counterparties to buy options. The counterparties are the ones that are taking the risk of the options even off of the insurance company. So the client gets the risk pulled off of them by the insurance company. The insurance company gets the risk pulled off of them by the counterparties. The Counterparties assume that literally, not just the client, but also the insurance company protected from anything that might go awry with those index strategies.

So you get as passionate about this stuff as I do. Like selling the annuity, you just, like, nerd out of it.

I just don't want it to be, like, misunderstood.

That's so important, too, because, you know, agents that are new or shoot, even agents that have been doing this for 20 years still don't get this.

It's true.

And so it's important to understand it. And that's why I keep nerds like this around because. Because they are very important. Like, legit nerds are the ones that.

Make it in life.

I've been saying that for years. I learned that.

Well. I remember when I was growing up, called a nerd was bad. Now, being called a nerd is a compliment.

Yeah, you're, like, hip if you're a nerd now.

Well, because, honestly, that means you're the person that literally focuses on something with a lot of passion in an area that has a lot of detail. And that's, you know, what I consider a nerd. And I'm, like, going, dang, that's. I want people like that around me, honestly. So, yeah, I think that pretty much covers for today. I hope that helps you. You have a great day. And, of course, happy selling.