We are seeing more and more Variable Index Annuity cases come through the door as time goes on and uncertainty in the market increases. If you are not familiar with these types of contracts, many of them provide clients with an opportunity for market participation, a buffer against losses, and zero fees. With many clients feeling concerned about volatility and a possible recession during 2020, the iron is hot, and their ears are open.
The Variable Index Annuity product that has been seeing the most action from our advisors is the Brighthouse Shield product. The Shield contract can be constructed in a variety of different ways by choosing from three term durations (1-yr, 3-yr, 6-yr), three Indexes (S&P 500, Russell 2000, MSCI EAFE) and three levels of downside protection (10%, 15%, 25%). Because this is a variable index annuity, you do have some upside limitations and those limitations are dictated by what level of downside protection that you choose. This can start to sound a little confusing so please stick with me. It is actually quite simple when the pieces come together.
If we were to go with the 6-year term and select 10% downside protection, the upside limitation would be 200% over the 6-year term. What Met Life is saying here is that if we put $100K into an account and it goes up to $300K over the next 6 years, we get to keep all of the gains. If it goes to $310K, we get to keep $300K. On the downside, if over the next 6 years the contract goes to $90K, Met Life eats all of those losses and your client will get their $100K back. If it goes to $85K, then your client would have a $5K loss because Met Life is only absorbing $10K of that loss in this example.
As I mentioned above, the Shield product is becoming more and more popular for advisors that have mutual fund clients that are concerned about the volatility in the market but still like the idea of market participation with the addition of downside protection and no fees. It has also shown to be a good fit for clients in fixed annuities, fixed index annuities, and bond funds that are looking for a little more in returns than they are currently getting while maintaining some downside protection.
If you would like to talk in more detail about this contract, the different options available, or potential opportunities, please give me a call. Also, I have attached a link below to the Shield website where you can learn more about the product and see current rates and design options.
Contact Micah Hesting for more information:
Relationships/Business Development Strategist
Ext. 113
micah@leadersgroup.net