Annuity FYI Visitor Blog

In the PR Web press release “Annuity FYI Endorses FDIC Insured Equity Linked CDs as Preferable to Fixed-Indexed Annuities,” Annuity FYI’s endorsement of equity linked CDs is highlighted.  Equity linked CDs seem to be a better investment for most investors than fixed-indexed annuities.  The investment products are issued by banks and linked to particular stock market indexes.  The FDIC insurance associated with equity linked CDs ensures that your principal is guaranteed.  Even though they are not annuities, Annuity FYI believes that the similar benefits offered by both investment products makes them both an important part of investors’ portfolios.

Wells Fargo’s WISE US Index Equity Linked CD is Annuity FYI’s top pick for investors.  With a 6 year time frame, FDIC insurance, and market upside participation, Wells Fargo’s product is one of the best available.  There are other benefits to this particular product as well, including a high participation rate.  Annuity FYI likes equity linked CDs over fixed-indexed annuities because the latter tend to have high fees that are not in proportion to the benefits investors receive.  Some of the best benefits to equity linked CDs are their low cost, principal protection, and benefiting from market upswings.

In “Sidestepping Skepticism, Prudential Scores with Variable Annuities,” Matt Ackerman of Bank Investment Consultant describes how consumers’ opinions of variable annuities are changing.  While many people thought variable annuities were “too expensive or too complicated”, they seem to realize the great potential of these annuity products now.  Since retirement savings have gone down by 40% over the last year and a half, consumers are warming up to this product with its guaranteed income, protection against the market downside, and the ability to reap the benefits of an upswing in the markets.

Prudential Financial’s U.S. annuity business is very strong.  They saw a 53.8% increase in annuity sales last year, with fourth quarter annuity sales increasing 71.4% from the year before.  Their growth in the bank channel has been very substantial as well.  After adding fifteen new banks to their distribution channel last year, their bank sales of variable annuities increased by 152%.  Bank clients typically like to purchase fixed annuities, CDs, and other products that they deem “safer.”  Since the returns in those products haven’t been quite as successful for their retirement income savings, variable annuities are garnering more interest.  Prudential is sticking with this product that they believe in by introducing new products and options, and always being an innovator.

Wells Fargo’s new SGI Wise US Index Equity Linked CD is Annuity FYI’s top pick for this investment vehicle.  The equity linked CD is a great investment choice, especially with people who have a six year investment window.  Equity linked CD’s have the added benefit of being FDIC insured which is a comfort to many investors.  They are also linked to the market so that you can reap the rewards of a market upswing.

There are many reasons that Annuity FYI recommends the Wells Fargo wise indexed cd.  Not only is your principal guaranteed by Wells Fargo, it is also insured by the FDIC up to their maximum amount allowed.  With no cap or spread, this equity linked CD boasts 90-110% participation.  The index is easy to understand and transparent to investors.  While the SGI Wise US long-short index is new, it has been tested back to 1992 to determine the returns investors would have received.  With this information, it was determined that the SGI Wise Index performed above the S&P 500 over many timeframes.  Investors have the potential to do much better than the current low interest rates have been offering.

There a few things to consider when you compare equity linked CDs.  You do not want to purchase the product if you will need your money before the six year holding period is up.  While the 1% penalty isn’t that significant, it is best not to make withdrawals until the CD matures.  Any gains you receive will be paid at the end of the six years and there are no dividends.  With those considerations, if you think an equity linked CD may be right for you, contact one of our experts.

An equity linked CD is a certain type of a certificate of deposit in which the rate of return is linked to a stock index such as the S&P 500.  Equity linked CD’s are issued by banks and insured by the FDIC, offering the confidence that your investment is always secure.  When you compare equity linked CDs with annuities, you’ll find that the products offer a lot of the same benefits.  Principal protection is one of the main benefits offered by both retirement products.  They also offer low cost compared to other retirement vehicles and the chance to participate market upswings.  While the equity linked CD and the annuity are different retirement options, they offer similar benefits and may be useful in combination when determining your retirement portfolio.

Annuity FYI recommends Wells Fargo’s equity linked CD.  The product, Wells Fargo SGI WISE US Index, has the best benefits that Annuity FYI has seen in this type of product.  The CD term is 6 years with a participation rate averaging 90%-100%.  There are no spreads, caps, or fees and the minimum investment is only $1,000.  The FDIC guarantees 100% of the principal amount invested.  While there may be other equity linked CD products recommended by Annuity FYI in the future, at this time the Wells Fargo SGI WISE US Index is the only one believed to be best for retirement portfolios.

Investment News‘ Darla Mercado summarizes the variable and fixed annuity sales of 2009 in her article “Banks’ annuity fee income rose, FA sales fell in ‘09 3Q.”  Through the first three quarters of last year, bank holding companies saw the fee income from their annuity sales increase.  The sale of fixed annuities however, decreased in the third quarter due to their decline in popularity through 2009.  With $2 billion in fee income from variable and fixed annuity sales during the first three quarters of 2009, banks saw a 2.5% increase from the same time frame during the previous year.  Commissions increased 4% during the third quarter, according to a report of the top 922 bank holding companies.  Overall, 71% of the largest banks accounted for almost 95% of the total annuity commissions.

Wells Fargo held the top spot even though their income was actually down from the comparable period in 2008.  In second place was JP Morgan Chase & Co who also saw a decline from 2008, albeit a small one.  Regions Financial Corp. and Bank of America Corp. saw the largest gains in annuity fee income during the three quarter time period.  Western National Life was the largest seller of fixed annuities, despite the product taking an overall decline in the third quarter.  Three companies made their way onto the top 10 list of bank annuity sellers last year.  Jackson National Life Insurance Co., ING USA, and Hartford Life Insurance Company came onto the top ten list in 7th, 8th, and 9th places.  Annuities hold strong as important financial products, despite some declines in the fixed annuity sales.