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A Study in Scarlet


It’s Halloween, and in my neighborhood the trick-or-treaters already came and went – they did their rounds between 3 and 6 p.m. I’m happy to report that I got more of them this year, but I still have a good amount of leftover candy. I will do my best to avoid the temptation to dig into it!

In my last entry I promised to provide a foliage picture; I’m not entirely satisfied with this one as I meant to take a nice leisurely drive and find a place to snap a shot and capture the radiant colors of the New Hampshire mountains. Alas, I got sidetracked with work and personal tasks. Thus I quickly took a picture of the brilliant red leaves of a tree that’s only steps away from my home.

Which made me think perhaps there’s a theme or two to go along with my picture.

I thought of “the inevitability of change.” That would work. Also “adapt and overcome.” Equally as good.

One has to admit that we’re in a tricky situation at the moment. Low interest rates are particularly problematic, especially for deferred fixed and income annuities. The rate situation has also accelerated product de-risking on the VA side. Market volatility and COVID-19 haven’t helped either. RILAs have been a “saving grace” if you will.

Despite the challenges the industry faces, I think there are opportunities. It’s often been said the annuity can do things most other financial products can’t. In multiple recent surveys, Americans indicate that asset protection is foremost on their minds, so we have that covered. Survey respondents also say they would welcome a product that provides guaranteed lifetime income. We have that too. Even though few clients annuitize, there’s evidence that financial advisers and clients are steadily warming up to the idea of using annuities for income.

There are other client concerns annuities can assist with, one being inflation risk, which ought to be foremost on people’s minds given movements in the CPI of late. Recently there was news that an index-linked SPIA is close to launch. I imagine other insurers will watch its progress and, if it proves successful, they will weigh in with new twists on the concept.

I also think annuity insurers can do more to assist with long-term care costs, which are always high on the lists of Americans’ retirement concerns. I realize that robust annuity/LTC hybrids of the past have not done well. Still, I have to think the industry can help fill the coverage gap with fresh designs.

For individuals and groups alike, it’s certainly easy to get complacent and focus only on near term goals. I imagine that most industry players have members of their teams tasked with looking ahead and coming up with contingency plans for when conditions change, whether for the better, or worse. I think such people will be invaluable in the year ahead.

Over the years I’ve become steadily better at strategic thinking, and I hope to continue improving on that front.

In closing, in the future I will do better with my foliage photography, to capture more “dappled things” – as per a line in a famous poem.


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