Financial advisors encounter clients seeking low-risk solutions to meet their goals. Stock market volatility and historically low interest rates in the bond market make finding good yields difficult. Meanwhile, savings accounts and certificates of deposit (CDs) offer paltry rates, too. As a result, annuities are gaining steam; this year’s total sales are projected to surpass the all-time high set in 2008, according to insurance group Limra. 

The single-premium, fee-based Multi-Year Rate Guarantee Annuity (MYGA) offered through Halo Investing’s Outsourced Insurance Desk (OID) helps meet the needs of pre-retirees and the growing number of retired people.

A New Age of Bond Investing

Creating and maintaining an investment portfolio to weather various market conditions used to be rather easy. Recall the 1980s and ‘90s when market interest rates were north of 5%. The days of parking client assets in safe Treasury notes and resting easy knowing that those coupon payments could meet the daily-living expense needs of retirees are long gone.

Today’s Treasury Rates are Still Very Low

New strategies are needed, and monitoring portfolios more closely will be required. That creates opportunities for independent advisors to differentiate themselves from the pack. One such solution is a MYGA available through Halo.

MYGA Rates are at Their Highest Levels in Two Decades

Currently, investors can earn competitive yields on certain MYGA products. In fact, rates are much higher than yields seen on U.S. Treasury securities and CDs. Moreover, MYGA interest rates are above high-grade corporate bond yields and may have certain tax advantages over traditional fixed-income securities. Annuities offered through Halo, use risk-pooling and mortality credits to pay out potentially larger interest rates than fixed-income products.

Investment Strategies

RIAs might be curious about how best to incorporate MYGAs into their portfolios. While a typical contract owner could be someone nearing or in retirement, the MYGA might also be well-suited for clients with a specific financial goal. Across a range of investor profiles, a three-year MYGA could make sense since the rate is high versus other securities and account types and the maturity is defined. This portfolio bucketing method works well from a behavioral perspective since a specific account has a special purpose. It also helps advisors tell the story of how money is used to meet financial goals.

Laddering With MYGAs

For clients at or near retirement, similar to laddering a bond portfolio, MYGAs can also be laddered . MYGAs can be put to work periodically so that each year, for example, an annuity pays out. That cash flow can then be used to meet the everyday needs of risk-averse retirees. Bond laddering has long been a way for advisors to manage bond risk and liquidity needs, but today’s low yields make that old approach tougher. The method works, but new vehicles are required to meet retirees’ financial needs. Advisors might be intimidated by using annuities this way but working with Halo’s OID makes transactions smooth and easy.

Target-Date Retirement Investing

Bond mutual funds and ETFs feature duration risk – the mathematical reality that as market interest rates rise, a portfolio of bonds declines in value. By taking from their bond allocation, which has interest rate risk and default risk, the portfolio’s risk and return construct changes. While there is some downside potential with any annuity should a client surrender early, investors may potentially sleep better at night knowing a MYGA is issued by a fundamentally strong firm. In this portfolio management solution, advisors can frame holding the annuity as owning a common cookie-cutter, target-date mutual fund—the upshot is that the strategy is much more tailored to a client’s objectives and can be a bridge to retirement.

Issuer Stability

Halo closely analyzes companies whose products appear on our platform. Generally, we seek management teams who are experienced and focused on operating a financially sound company. Through cost-efficient operations and a seamless business model, clients earn competitive rates on MYGAs.

Conclusion

Halo Investing offers a suite of annuities to help advisors create customized portfolio strategies for all their clients. Our OID saves RIAs time and energy so they can focus on cultivating personal relationships to grow their business with scale. Fixed deferred MYGAs, available in both qualified and non-qualified plans, feature strong yields while being backed by a time-tested and fundamentally strong company.

Please see our Halo Disclaimer for other important disclosures.