Why choose FIAs when MYGAs are so high? | 7 Figure Annuity Sales Podcast | Ep. 214

Today we're going to talk about why fixed indexed annuities when myga rates or multiple year guarantee annuity rates are so high.

Hey everyone, this is Chad Owen. Welcome to this week's episode. This is my sidekick, Caleb North. Caleb, I might be able to talk today. We'll see. Might be able to. But hey, you know what, I don't always talk about this, but remember, if you want a great imo, field marketing organization, whatever you want to call, there's. We can, we, we've been called all sorts of things. Here's the reality. We're marketing organization. We help you write annuities. That's really what we do. But reach out to Caleb north and we are Retirement Realized Financial. If you are really happy with your actual organization and you've been with them a while and they do a great job, but you just want some training, then that's Retirement Realized Agents Academy. We do not require people to be signed up with us to get our training.

That's right.

But it is not free. It will cost you. And we have multiple levels. We have every level from hey, I'm brand new to I really want to dig deep. And you know what, if you really want to dig deep, that's when you get me involved and that's when it cost you a of money. Lot, lot of money. But does it really? Because a whole year's membership can be covered in a $300,000 annuity.

That's pretty low.

That's the thing that, you know, people don't understand is it really is easy in our business to do very, very well.

Yeah.

And you know, even if you're writing 5 million a year in annuities, we're doing very well.

Yeah.

Now the reality is you're going to have some expenses.

Right.

You're going to have extra things so, you know, you know.

Be bumped up in a higher tax bracket. That's just part of life. But the reality is we are here to help. Anybody we partner with is there to help and that's really what we strive for. Just as when I'm in front of a client, my number one priority is helping that client with the best product, the best fact finding the best solution, the best problem solving, all that. It's the same thing we do with agents.

It is, it is. I've told agents before, like my, my genuine thought process working with them, it's client first, agent second, imo, third Y. I mean that's literally the, that's literally the order of operations. And I'm a firm believer that if you take care of other people.

Yep.

Your business will take care of itself.

If you take care of the client, you know, everything else comes into play. You know, I've heard of people getting sued. I've heard of people, you know, losing the license. And I'm going, don't ever compromise ethics and values. But, and that all has to do with what we talked about the last, last podcast about excellence. Everything has to be done in excellence. Now me, I'm a strong believer. I've been away for many, many years. I work for the king's kingdom. So therefore my greatest expression of my appreciation of what God has given to me is how I give it to others. And so if he's given me the mind to figure things out, I can't waste that and I have to do it in excellence. And that's why you see our platform, we're actually, from what I hear, we're revamping our platform again and adding more benefits to it. I don't need to know, I don't care right now. I just, you know, operate next.

We're going to do, make it even better.

Yeah, it's going to be even better. So my guys.

Well, I've had a.

Lot of, I mean, and it makes sense to me. I mean, Fed rates on the rise, MYGA rates on the rise, par rates on the rise, cap rates on the rise, bread rates on the fall. Right. You got to make sure you get the verb.

Yeah, you do.

But, but it's true. I mean, mygas are, when you get three year MyGas over 4% and you can guarantee over four and a half for five and seven. I mean, that's pretty stinking solid.

Correct.

And so clients are really loving the look of those mygas. But what I've, what I've seen is the myga's been almost a sell itself type thing right now. Especially, especially with people coming from CDs too. Because CDs while they've gone up as well, they're not, they're still not nearly what Mike is getting.

Not even close.

But FIAs still have a place.

They do because it goes back to the one question. What is that one question?

Is this or what's the purpose of the money?

Yeah, purpose of the money. Everything revolves around what is the purpose of the money. If it's just to park there and you want to walk away with it completely in three years. Now, obviously, you know, if it's an annuity, if you want to do non taxable, you have to do a 1035 exchange. But that being said, what is the purpose of the. Well, non qualified annuity, 1035 exchange, IRA, it doesn't matter. But the whole point to that is what is the purpose of the money? So I hear agents say that all the time. And here's just the blunt statement. Most the time you see agents that push mygas are people that want future business. So they know in three years or five years they're going to get paid again because they're going to. If it's non qualified money, most people are going to roll that over into another annuity. So they get paid. To me, all I care about is one thing goes back to what is the purpose of the money. If it's an income plan and you want income, then I'm not going to do a myga.

Right.

You know now depending on the age. So somebody says, hey, you know what, I'm 82 years old, I only want interest to live off of. I don't care about anything else. Well then in myga, but then I tell them, hey, at the end of this three years, we don't know what the interest rate's gonna be.

Right.

And we have seen migrates go really low. I mean I remember three years, they were like point 75, you know, they're really low.

Was that back in.

Ellie?

It would have been a while ago. Yeah. And actually, actually wouldn't have been that long ago. Is, was it just like one and a quarter, about six months? No, that would have been longer than that. Probably been about two years ago. 20.

20.

Yeah, so probably would have been about two years ago. But the point is, you know, your payout percent, a fixed indexed annuity with an income rider is almost always going to be higher than 3 or 4%. So obviously depend on the age. Single joint lifetime payout. So I rarely write mygas, it's just not that often. Am I losing future business? Yes, I guess. But it's not my money.

Right.

My job is to find out what is the best for what they want it. Do they want to plan for living or plan for dying? If they want something that has an income type on it, you've got to do an income rider. And I know there's other ways that people do that and I'm not knocking it. Sure. I'm just saying if you're talking straight, guarantee, no matter what, you have to have an income rider.

Right, right. That was actually the first thing I put down was why fias when mygas are so high. Well, income needs.

Yep.

I think too, like, sure. The Migrate, you've got a guaranteed rate there. PAR rates are on the climb there and they have shows the one year.

Interest rate in an indexed annuity. I mean when you can get three and a half percent on a one year fixed rate.

I literally made a note. I know of seven companies that have one year fixed rates over three and a half percent right now. Seven companies, you talk multiple products within those.

So then the down years are the flat years. You put them in the one year fixed and then the market falls and then it starts to recover and then you put them to one of the higher participating or higher opportunity indexes. You could do really well.

Right. I think too considering like and stuff. Because clients don't know and you're not, you shouldn't be speculating.

Well, you know, well, clients don't, agents don't know.

Well, that's, nobody knows what the market's going to do. Yeah, I, I've heard a lot of people, a lot of very educated people talking about a couple maybe three years, two to three years of some potential turmoil here.

I completely agree with that.

The challenge with that though is still what at the end of the myga. So you go three years, five years, what do you do at the end?

What's, what's. So if you're 62 years old and you want to retire at 65 and you got a MYGA for three years, what's that interest rate going to be at 65.

Right.

Especially if you have an income rider that has a 4, 5, 6, 7% return on the income value. Right. Not the actual account value, the income value. And you're guaranteed going to be a higher spot there. So it all goes into proper fact finding.

It does.

I have no issue with mygas, I have no issue with fears. It's what is the purpose of the money?

Yeah, I think too you use a three or a five year myga and you get to the end of it, you either go back into more three or five year MyGas or you go into an FIA. But you've just elongated your surrender. Right. So like consider you, you buy a three or five year Myga now and in three or five years you buy a 10 year FIA because market's in a better spot. You've just added, you know, you're at 13 years worth of surrender charges or 15 years worth of surrender charges which.

But what's, what's a good five year migra right now you're over four and a half. Yeah. So you take four and a half versus a three and a Half for a one year fixed rate on an indexed annuity with an opportunity. Now, once again, we don't know exact timing on the market. We don't know when it's going up, we don't know when it's going down. We do have educated guesses. Like I mean, when you even have the large institutions right now saying that they believe the market's going to fall for the next couple of years and you had a couple of dodos out there going, oh, it's going to recover. It's. We've hit the bottom already.

I mean we've already heard that. We heard that. About what? I mean, I was gone for a while and I remember reading an article because I still stay in touch with the market even when I'm gone. But it said, oh, we've reached the bottom. And then they had like a week of really bad returns and I'm going, wait a second, the market just lost a thousand points in two days. And I thought you said we just reached the bottom. It's stupidity.

It, it is interesting to me. I'm not a, I'm not an economist. Not going to pretend to be.

I know you're not.

Since 1980, we have only had one period of time where there were multiple consecutive down years. It was from 2000 to 2003. And that came on the coattails of a five year run. I think it was five years that totaled 130 something percent increase in the market. And then it just, it came, yeah, came down. Last three years was the best three years in the market that we'd had in the last decade. The best three year period. And here we are. Now obviously there's other things at play. You can't just follow the patterns of the S&P 500 and try to make some kind of prediction.

But you have stocks, bonds, mutual funds and commodities, all BNB by cash. You know. Now granted that's depend on whatever day you're looking at it. But it happened in 2018 as well.

Right?

We don't know what's going on.

We don't.

That's why I love the indexed annuity, I love the mygas, I really do. I like both of them. Because you know what, I can look my clients in the eye, straight in the eye and I say, hey, you know what, if you have a fee, your worst return is zero. Now if you have an income rider charge, of course you got to let them know what that fee would be. Because there are some people that say flat out, they go, oh, you'll never lose money in this. That's true. Due to market volatility. But if you have a 1% fee on there for the rider, then of course their account value could go down for the next 10 years. So you just have to be very straightforward. Clients don't like surprises and neither do I. Yeah. Especially when it has a negative impact on their retirement or their money. So make sure you disclose everything. Yeah. That's why you go over the illustration. That's. I mean, if you follow our platform, you'll see how I go over the fact finder, how I go for the presentation, how I go over the illustration and that helps you. Once again, the fact finder is going to tell you, do they need a MYGA or a fia?

Yeah, it's true. Do you. Will you.

And I guess you'll probably kind of consider the current situations when these come up because this year if you've sold an fia, you've encouraged clients to go into the fixed account.

Yep.

And then reach. And you're emphasizing this. When you get your reallocation statements, reach back out to me.

A call. Always give me a call. Do you that to every single person multiple times? Yeah, I say that when I'm in the appointment, I say that in the policy delivery. I mean I go over it multiple times.

Do you foresee yourself using more two year strategies next year when you get these clients calling? No.

No.

Okay.

I'm just not a two year strategy person. Yeah.

I didn't know if.

And I'm not saying it's wrong. There are no. There are some people that are definitely. Why would I do that when I could get them three and a half percent in a one year. Well, let it continue to fall instead of putting them in two year. Then I know it's still in two years. Is it going to be back to where it was? We don't know. I don't know. I mean I guess if you look from 2007 to 2000. No, 2008 to 2010. I believe the market was still lower in 2010 and I think 2011 too. I'd actually even say maybe even to 2012. And I'm just going off of pure memory right now, but I think if you're in the top of 2008, the highest in 2008, to the highest in 2012, I don't think we had recovered yet. So that means four years of 2008, you would put in 2008, 2009, 2010. So that's two full years. You went 2010 to 2011, 2011, 2012, that means you have two two year cycles, so four years total that you probably didn't make anything for the client. Yeah. Now and I'm not saying there aren't strategies out there that didn't perform differently. I'm not saying that. I mean we have a couple hundred insurance companies. Each company has 10 to 15 different products. Each product has five to 15 different indices. So I'm not saying that hasn't happened.

Well, a zero, a zero in an annual point to point is a whole lot easier to swallow than a zero. And a two year point to point. Holy smokes.

I remember one time and I still, I hate this but is when I first got into the business there's a, they came out with a five year point to point and I put probably four clients in. I'm sure par rates were absurd and none of them did that. Well.

Yeah.

And I hate that still to this day. If I could go back, if you say I could change anything in my entire business. But I did what the FMO said, I did what the insurance company did. I did my research. All their illustrations looked like it. I mean everything looked like it worked.

Right.

But you know, nowadays I'd go, God, five years is way too long to ever say I want one strategy.

Especially if you're taking withdrawals or income.

Yeah.

You're just drawing it down every single year.

Very true.

And then you may not credit anything.

This is very true.

Or you get a peasy little now.

And there are two year strategies that have done really well. I'm just saying I don't know if I'll ever do a two year strategy again.

And if you do, you try to, don't you try to like ladder them?

Yeah, I would. So that is one way I have done that is where you do a one year and a two years. So you do 50% the one year, 50% the two year. Then the next year you move that 50% one year into the 50% two year. Then every year you're having some sort of trying to potential growth and, and it's, it's easier quote unquote to time the market. There's no such thing as time in the market. I mean when I, I have some very, very, very wealthy people that I know that. You know, one guy's a billionaire, multi billionaire and I'm talking to him and he's in a stage of life where he's got so much money, his whole life is where, where do I give to now? I mean that's literally his whole life Is pretty good, I guess. Yeah. I just spend time with my family and where do I get to give. And he's gone, Chad. I don't know where it's going. And now this guy that's built, I mean I'm not going to name the companies but he's built major, major companies that anybody knows the name of and he's telling me that way smarter than me. And when they tell you that so when somebody tries to sit there and say well I can do a three year point to point and I think it's going to do better because it's a higher participation rate. A higher participation rate of zero growth is still zero.

Yeah, it is. So with that in mind, if you came across a client, their income was taken care of. They don't, they have no income need whatsoever.

It's literally let's just 100% we've checked if they die, if one's died, if they're both 100% it's like checked everything.

Yeah. Like one of those clients you had last year where they just had bookus of money. Their income is crazy. Pension, very low expenses, no debt, joint lifetime payout.

I know exactly who you're talking about. There's no way they're ever running out of money.

No, never running out of money. That type of scenario. Are you selling a fixed indexed annuity for just protection and growth or would you sell a MYGA in this market even for say a 65 year old? Even just a 65 year old.

I still, I still probably go with the fear. Yeah, yeah I still, I would probably.

And just recognize and disclose like hey, the first couple few years here may not quite.

Oh I tell them flat out you could make zero. Yeah. Now if you're doing a one year fixed strategy I'll say hey this is your fixed rate, this is what you're going to get. But I have no problem to tell the client there is a possibility and a likelihood that during this 10 year time frame you're going to have zero years. Oh yeah, I have no problem Tones.

Well, I mean we just had a gold mine of a 10 year period and we had the last 10 years and there was what two or three three zero years.

Yeah.

So. Or negative. Yeah, yeah.

If you're talking to annual point to points and of course it's because we get people that say it depends what month you put it in. You know, I mean there's a lot of different determining. Yeah but you know I just, I always err on the side of being too conservative and making sure I am over emphasizing the possibility of a zero percent return. Yeah, I have no problem talking to them about that. I say, hey, there's years where we made 10%, 15%. There's years where we made zero minus your rider fee. So I, I don't have problem. It's people want honesty. That's really what it comes.

That's true. So just because myga rates are super high and clients may be asking about them, and I'm sure they are. I've talked with agents and clients are asking about mygas. I mean like left and right. They want those guarantees, but make sure you still do a full fact finder and assess if there's an income need or not.

What is the purpose of the money? Yeah, okay. I hope this help you helps you guys. You have a great day. And of course happy selling.

It.