Hybrid Annuity Strategies

If You're Calling an Annuity a
If You're Calling an Annuity a "Hybrid", You May as Well Call it a Unicorn! It Means About as Much. By-John-Foxx-Getty Images

 Annuities are regulated at the state level, not federal, so most annuity promoters and hucksters have matriculated to the internet, TV, and radio to push their over-hyped annuity messages. The latest feel-good word that these hype-sters have adopted to sell more annuities is the word “hybrid.” It’s utterly ridiculous how this nonsense word has spread among the uneducated and untrained annuity agent army.

 The fact that I am having to address the word “hybrid” is proof that the annuity sales industry goes unregulated and the sales messaging rules in place are not enforced.  

This hybrid hype is primarily attached to one product type, Fixed Index Annuities (FIAs). These strategies are also called indexed annuities, or equity indexed annuities, but in the last couple of years, the word hybrid leads the way.

Hybrid is a plant. Hybrid is a car. I saw an ad the other day for a hybrid mattress. HYBRID IS NOT AN ANNUITY. I always tell people that if we are going to make up a name to describe an indexed annuity, why not choose “unicorn.” Everyone loves unicorns, and it makes as much sense as this ongoing hybrid nonsense.

What the annuity promoters are trying to do when using the hybrid word is to attract what I call LIAB’s (Low Information Annuity Buyers). These promoters want the LIAB to think they are getting more for their money because the annuity is called a “hybrid.” This is the reason you see most internet annuity videos and pop up ads using this word in every part of their sales pitch.

Once again, this is a prime example of the annuity industry not regulating sales messages or enforcing laws already in place. 

Every single annuity on the planet, this includes all 15 types, offer multiple benefits within their contractual guarantees. In essence, and from a semantic standpoint, every annuity could qualify as a hybrid because they all have more than one value proposition.

Sorry for bursting the annuity hype sales bubble, but facts are facts.

History Is Being Made

If the current hybrid hype continues unchecked, Fixed Index Annuities (FIAs) will go down in history as one of the most mis-sold products in financial history. Right beside the mortgage mess will be the indexed annuity nightmare; sales stories that too many trusting Americans bought into under false pretenses. 

You can work your entire life saving your hard earned money for the hope of retiring and enjoying the spoils. Any person off the street-with no investment or financial qualifications-can get their state’s life insurance license in less than 2 weeks and sell you an indexed “hybrid” annuity. In addition, they can say or promise anything on an internet video, TV, or radio ad to sell the hybrid dream without repercussion.  Unless things change soon, this will end in an ugly fashion.

Designed to Compete with CDs

The first Fixed Index Annuity (FIA) was introduced in 1995 to compete with CDs, not the stock market. That’s what they still do, even though most agents pitch them as potential market return products with principal protection. Only the principal protection part of that statement is true.

 

Indexed annuities are good products if explained in full to the client and return expectations are in line with the contractual realities. I use indexed annuities in some of my laddering strategies, and as delivery systems for attaching income riders for future income planning.

It’s important to remember that there is no “too good to be true” product out there, and just because some agent uses the word “hybrid” does not mean it’s better. Think logically and rationally before swallowing the high pressured sales pitch. There are no exceptions when it comes to the one size fits all, "too good to be true", annuity dream.