How To Handle Falling Rates When Selling Annuities | 7 Figure Annuity Sales Podcast | Ep. 308

Welcome back to the Seven Figure Annuity Sales Podcast. Caleb north here joined with Chad and Chad. We have an elephant in the room today.

We do. Okay.

We do. The Fed cut rates.

You know how you eat an elephant?

One bite at a time.

And medium rare, of course.

But yeah, has to be well salted. Yeah.

Oh, I. I've never eaten. I've never eaten an elephant before. Probably one of the units. I have not. But yeah, Fed rate cut. I mean, yay.

Yeah, right?

I mean, I don't know. I don't know how to respond to it because it's so convenient how it happens a couple months before the election, you know, which is just so stinking stupid political. It just drives me nuts. It's like, why don't they just. I don't care what side. Just look out for the people, be nice and look out for the people. I mean, there's people that have needed Fed cut rates for a long time and they're hurting and it stinks to see that. But yeah, okay, fine, they cut it. Well, we'll see how it affects us.

Yeah. Our day in the sunshine. I guess all good things must come to an end. And we've had.

I don't agree. I don't. I don't agree. I remember there is always good days when you're talking safety and security, guaranteed income you could never outlive with no risk to the market. It doesn't matter what the Fed rates are. We are always going to prevail. We are always going to be in the light. And, you know, even if interest rates drop down to 2% for our fixed rates, we still have good income rates and we always have, even during the crazy times. So, Debbie Downer, stop being a downer.

No, I had a whole conversation with somebody on LinkedIn about this concept where basically the idea was positioned of, okay, well, do we need to start looking for alternatives to annuities? And my response was, no, no. Annuities are the alternative to everything else. You don't look for an alternative to the alternative. When you go back in time, you go back even before fixed indexed annuities, and you had just fixed annuities, right? Guaranteed interest rates, which were basically a bond alternative. And then spias and dias with annuitization for guaranteed lifetime income. We were dealing with, you've got the income side and then you've got the bond alternative side and then come in fixed indexed annuities to basically just be another bond type of alternative in a portfolio with more upside potential. And then years down the road now we have income riders and things. And so. So my argument to that is that no, and as a matter of fact.

No, I'm not being a Debbie Downer at all. I think we have over the last year and a half, yeah, we've had phenomenal index rates which have, have been fantastic and enjoyable while they've been here. But I think that anybody who would, you know, suggest the idea that now with rates coming down, that annuities don't have a place. To me, it just shows the brevity of their career for sure.

And that's the thing. I mean, we go back to the lifelong concern, how long am I gonna live? And where's the stock market gonna be tomorrow, let alone five or ten years from now? There is nothing. And I'll debate anybody all day long that there's nothing out there that can do what our products do. And I think of. You know, I came off of two very challenging weeks. I mean, for me to write $100,000 for two weeks, I am contemplating smashing my pinky with a hammer so I can feel pain somewhere else. Because that, to me, I just, it's hard for me to comprehend. But the way I look at it like this week, I actually have pretty good week lined up, I hope. We'll see. I mean, you never know until you've written the business, until you've met with a bunch of clients. But, you know, I love what we have and what we get to do. And more volatility means more concern for people and that's where we get to help people more. So, yeah, yeah, the Fed rate kind of, I mean, I've been doing this a long time, man, 20 plus years. And I've seen so many ups and downs in the Treasuries, the, the income riders, the payout percentages, the bonuses. It just doesn't matter to me. We will always prevail. You know, I am on track for potentially a record year. I'm at 25 million now, I think. And you know, it's, it's could end up being 32 to 38 million. I mean, I'm hoping it's more, but that's with the crazy things, all these crazy things going on right now. And that's with volatility in the market, that's with political uncertainty, that's with all these things. So what I'm saying is when we have Fed rates dry drop or rise, it shouldn't really affect how we do business. It just shouldn't. Because remember, everybody else is in the same situation when we have volatility like the stock market being propped up is just insane. It should not be doing what it's doing right now. We already know why it is. It's market manipulation. It's, you know, companies buying the stocks or, you know, with cash that they have to prop it back up. And it's just all stupid stuff. But the point is they still don't offer safety and security. They don't offer guaranteed income. So the Fed rate, though, it does affect us a little bit. It's just not going to change our business. I don't.

Right, well. And you solve the problem at hand with the best solution available at the time that it needs to be solved. So, you know, if we go into 2025 and we're looking at cap rates on the S&P 500 of, you know, six, six and a half, 7%, as opposed to what we remember just a few short months ago from right now at 10, half, 11% caps, and we're like, oh, well, this product isn't very good because it's not as good as what it once was. It's like, well, that product isn't available anymore. So you still have to try and solve the problem to the best of your ability with the best option that's available to you at the time and for guaranteed lifetime income upside potential with no downside risk. And, and like you say, creating that stream of income that doesn't matter how long you live or what the stock market does, you're going to keep receiving those checks. There's nothing el that's going to do it, regardless of what the rates are. So it's still the best option for a lot of scenarios.

Yeah. The thing I look at is I was just doing an annuity review with someone that was at a 2.25% fixed rate. You know, now you say that's bad, but then that was phenomenal. So we see these rates drop. Our products are going to keep up with them. They will. And they'll keep up with whatever's going on in the current market. So, you know, I just, I don't know. That's why, you know, this so much of my business is with income writers because no matter what's going on, it addresses the concerns of people outliving their money. And it's only the very wealthy clients generally that I deal with that they don't need income, you know, and we still will take a good chunk of their money and do income guarantees, but then we will have leftover money that we can do just a straight Index. And you know, it's, it's the, there's very, very wealthy people that now they say, you know, I'm not as concerned about making money on my money, but it's making sure I keep my money. And I think that's something to really focus on right now. Because whether Trump gets in or Harris gets in, God forbid, but you know, whether. And I'm, I'm flat out, I mean, I don't care what anybody, if people say Harris is the solution, you're not looking at the big picture. Now, Trump's not our savior by any means, but he is a business person and we know that interest rates will drop if he's in because he loves to stimulate the economy. And that's what happens when you increase interest rates. And anybody that thinks our last four years has been incredible for business is they have their head buried in the sand. I mean, I don't know who their clients are, but my clients are freaked out of their mind right now with high inflation paying way more. I just, I mean, my wife and I went to the store at Sam's Club and stick and spent $299 and we didn't even buy any major things. You know, it's just it, food, gas, everything is more expensive. And therefore the concern for people is how. I just talked to a guy that today he's going, I am concerned about inflation. You know, that's what he comes down to. He goes, what's happened the past three years with how expensive things are getting? It's a concern and we're going to see clients with that. So fortunately, this is a client I met with probably a good two, three years ago. No, actually is longer than that one. Holy cow. This client has been probably five, six years ago. And I said, we have the income plan laid out. And I pulled up the document that I made for an income plan. And he goes, oh, you're right, I forgot about that. So we have annuities that started 5, 10, 15, 20 years. We ladder them to where every five years there will be a thousand dollar a month increase in income. Now, fortunately, the amount money we put in the beginning was already way more than enough what he already had or what he needed. So even right now he's not concerned because I said, are you concerned about not having enough money right now? And he goes, oh no. He goes, I'm totally set, I'm totally fine with that. But I was worried about 5, 10, 15 years from now. And sure enough, we had that taken care of. So, you know, that's where the income laddering comes in and that beats Bonds CDs. Why? Because we know in five years that roll up rate is still going to be that roll up rate if he lets it continue to go. But in a CD we don't know what the CD rates are going to be in 10 years. We don't know what the CD rates Are going to be in five years. We don't know what the bond rates, even if the bond's still around that they're in or it's changing and lowering what they get paid out in the annuity. That's not the case. And people time and time and time again give me a hard time because when I say it's not a lot of people, but I'll make a comment on LinkedIn and why do you do income riders? Because I'm not concerned about getting a renewal business in 5 and 10 years like they are and they don't want to do an income rider because they know that once that income riders on they're never getting renewal business from that money. And but the point is, is I give them a complete peace of mind, guaranteed because we have annuities, as you know, the income roll up rate can go out to 20 years. But between all the different companies I'm using, I may use one company that will start in one year and a different company that will start in five years and a different company I'll start 10 and 15 years and I pick the best for each one. And then it doesn't matter what the Treasuries or the interest rates are doing in the current time because they're already locked in at that guaranteed roll up rate in their income and they already know that the payout percentage is locked in. So my income plan, when I ladder that out, they don't have to worry about it and either.

And often if you look at the numbers and a good income ladder in this type of environment where we do have really favorable roll up rates, often a good income ladder will actually outperform any kind of inflation inflation adjusted annuity. Right? So the idea being okay, we got 500,000, we're going to ladder out, you know, three different policies over the course of the next 15, 20 years or you take all 500,000, you put it into one product and it's an inflation adjusted. A lot of times you can from a worst case scenario, a guaranteed scenario with the income ladder actually generate more income at those thresholds than what you would reasonably expect to be at. Hopefully with an inflation adjusted type of Rider.

So yeah, I've never been a big fan of the inflation adjusted riders because they just, first of all, you have to take such a small, a lot smaller percentage than you would if you got it all up front. So if you take out more, when do you spend more money? When you're younger or older? Generally when you're younger. So enjoy it. But if you don't need it, then break it, you know, put it away, gift it to someone. I mean, you guys have heard me talk about this many times. The living legacy. You know, most kids, if you have a good relationship with your kids, most kids are going to be more concerned about what they get to do while you're live than how much more they get when you're dead. If you've got kids that are more concerned about how much you get when you're dead, then you exchange them for someone new. You know, I mean there may not be a return policy, but there could be an exchange policy. You know what if you don't appreciate that, then I'll find some kid that needs to be adopted and I'll get someone to appreciate, you know, the living time. Fortunately, all my kids, that's what they talk about. I mean we just ran up into the mountains and, and we spent the day together. Why? That's literally our memory time. You know, we get to see beautiful things, hang out together. I pay for everything and that's not because I'm trying to buy them off. I, you know, this is just my thought process and this is side note, but we're Christians and the father always has provision, the father always pays. And so that's just how I look at it. So we go up and that's where I'm passing the legacy. Now we're with how we build things. There will be more than enough when I pass away. But even if I didn't, I was still focused more on the things I get to do right now. So therefore making sure our clients understand. Like I remember going into my grandfather's basement and we would, would work together, we would work on things together. They had very little money. I mean they were definitely a Social Security paycheck to paycheck type of type of people. But I got living legacy. So you know, when we have a chance to help our clients do that, no matter what the Fed rate is, no matter what the interest rates are, no matter if the market's going up or going down, it just comes into that. And I know I'm kind of beaten a dead horse, but when I'm looking At this, I'm going, this is why, when people ask me, why do you almost always use income riders, is because it literally is a foolproof solution if you do it right.

Well, and I'll say, too, I've had conversations with agents and some of which have been concerned about these rate cuts because of what they're doing to the rates that we have in our annuity policies. And then others have been like you, Chad, not concerned at all. And what I find to be a very common thread between the two mentalities regarding rates is those who sell their annuities on the basis of features are concerned about the rate cuts and the rate drops and all that stuff that we're experiencing, but those that sell on the basis of benefits are not right. And so it's a totally. It's an entirely different way of positioning the annuity. When you're positioning the annuity on the basis of, oh, look at how great this 12% cap is. Don't you want to get no loss with up to 12% earnings? And they're, oh, yeah, it's great. And now all of a sudden that's a 7% rate and it's a little bit less attractive, but that's going to be a challenging sale. But when you're positioning it as a solution to a problem that they have a benefit to their retirement, now all of a sudden the whole nature of that sale shifts. And the rate cuts don't really impact that because they will always be solutions to people's problems.

Oh, and you know right off hand how fond I am of people selling off of features.

Oh, yeah, can you hear the sarcasm?

Oh, my gosh. It's. It's like it's about the benefits. How does that benefit their money? How does that benefit them? Well, I think we've hit this one pretty hard. So I appreciate everybody listening, paying attention, and of course, as always, happy selling.