Fixed index annuities (FIAs) have many strong advantages to help protect your client’s savings and provide sustainable income over many years. Our goal is to help you gain a better understanding of the components that make up FIAs. This knowledge will enable you to make well informed decisions when it comes to product selection and design.
 
FIAs accrue interest based on an external index, the index selected determines the amount of indexed interest received, which will fluctuate based on index change over the crediting period. The choice of the external index stands paramount. It is critical to explore the array of index options aligned with your FIA considerations.
 
Equally crucial is the selection of the interest-crediting method for your FIA. The crediting method determines how fluctuations in the index will be calculated then credited to the annuity. The method chosen incorporates elements such as caps, spreads, and participation rates, which may greatly impact of indexed interest earned.
 
In the subsequent sections, we delve into prevalent crediting methods, shedding light on how they work.

A straightforward crediting methodology, annual point-to-point hinges on comparing the index value at two distinct points in time. This option could work well during periods of higher than usual mid-year volatility.

Process Overview:

• On the contract anniversary compare the initial index value against the closing index value.
• Compute the percentage change in the index.
• In the event of an uptick in the index, the indexed interest you receive is determined by factors like participation rates, caps, or spreads.
• Conversely, if the index registers a decline, you won't accrue indexed interest.

 
Illustrative Example:
In a hypothetical scenario, if the ending index value surpasses the initial value by 6%, the indexed interest for the policy year could be contingent upon factors like a participation rate of 110%. Thus, the indexed interest would amount to 6.6%. However, if a cap is in place and is lower than the 6% increment, the indexed interest would be capped accordingly. Similarly, if a hypothetical scenario features a 3% spread, the indexed interest would be 3% (6% change in index value – 3% spread).

Echoing the principles of annual point-to-point, the multi-year point to point spans multiple years, thereby diminishing the influence of market volatility between the selected points.
 
Process Overview:

• On your contract anniversary, compare the initial index value against the closing index value.
• Compute the percentage change in the index.
• If the closing index value surpasses the initial value, the indexed interest is determined by the participation rate.
• Conversely, if the index regresses, indexed interest isn't accrued.

 
Illustrative Example:
Consider a two-year point-to-point crediting scenario, where the ending index value outstrips the initial value by 10%. Assuming a participation rate of 150%, the indexed interest over the two contract years would amount to 15%.

This volatility-sensitive methodology tracks monthly index fluctuations, offering interest in buoyant markets while being susceptible to downturns.
 
Process Overview:

• On your contract anniversary each month, juxtapose the current index value against the preceding month's value, calculating the percentage change.
• At year-end, aggregate the monthly index fluctuations, subject to potential caps on increases.
• If the cumulative sum is positive, you receive the corresponding amount as indexed interest. Conversely, a negative sum entails no indexed interest.

 
Illustrative Example:
In a hypothetical monthly sum scenario with a 2.00% cap, monthly index fluctuations are evaluated. The cumulative sum determines the indexed interest, with any negative sum resulting in no interest accrual.

Below is a chart outlining the relative sensitivity to performance volatility and interest potential of a few common Fixed Index Annuity (FIA) crediting methods.
 
Please note that this chart serves as a brief summary; it's essential to review the detailed descriptions of each crediting method before making a decision. Remember, no single method is universally superior. Depending on market conditions, one method may yield more interest than others—or no interest in a given year. Additionally, you have the option to combine crediting methods. Regardless of your choice, your accumulation value is safeguarded from negative performance.

​You spend a lot of money to get in front of these prospects. So, doesn’t it just make good sense to give yourself the best opportunity of closing the sale?  Time, money, and manpower are your assets.  Don’t waste them!  Set the stage for a successful conclusion to every sales meeting.  

For many professionals, closing the sale always seems to be the toughest part of the sales cycle.  If you have had this problem, don’t think you are all alone.  It is the toughest part of any business.  In fact, “closing the sale” applies to professions you may not have thought of. 

​Consider these examples:

• The teacher is constantly selling.  He/she is trying to get students to “buy into” the fact that this knowledge can be beneficial.
• Men and women of the cloth are “selling” in their sermons.  They not only are selling the fact that their message is beneficial, but also that it is urgent.
• Politicians?  Boy, do they sell!  They are selling a beneficial message, with urgency and with the hope that their message is novel.
• Parents?  Of course!   Parents are doing all the above selling and many times are more specific.  For example, “You will study or you won’t get into college and you will not get a good job!”  This is a classic sales pitch!​

What all of these effective “sales persons” do that you may not be doing  is “setting the stage” for the closing.  They know, perhaps instinctively, how to prepare their “clients” for a definite conclusion. 

Setting the stage includes:   

• Having a steady stream of qualified prospects.  Bad prospects mean low sales.  Too few prospects and you will look hungry and not get the close.
• Knowing your market.  Thoroughly knowing your market requires lots of time and study, but it is truly worth it.  It’s part of “setting the stage” for the closing.
• Understanding of why people don’t purchase from you or anyone else.  

 Here are four (4) general reasons that people don’t buy:

• No money
• No need
• No hurry
• No trust

Understanding these “rejection factors” is why it’s important with every prospect to build trust, qualify them financially, and conduct a thorough needs analysis. A “fact finder” form allows you to find your prospect’s number one concern or need.  Once you discover that need, you will be able to focus on it.  As you present your story, you can make sure that you are addressing your prospect’s main concerns. 

Furthermore, during this fact finding process, you should never introduce new needs or concerns.  The successful advisor always sticks to the big picture.  If you do present new topics, you will sidetrack your discussion and move away from not toward closing the sale.

Now, I know you’ve heard these tips hundreds of times.  You know what to do ... but are you doing it?   If not, you should review your branding and prospecting methods, examine your knowledge of your market, evaluate your time management procedures, and scrutinize your sales presentation. 

Again, at the heart of the process – the beginning of the sales call – is the use of fact finder interview.  You would be amazed at the high percentage of advisors who don’t bother to use a fact finder. Most advisors simply walk in and try to dazzle their clients with their footwork and close a sale fast. Using a fact finder will separate you from the majority of financial sales people, because your clients and prospects will see you as the true, professional advisor.

Do your homework – know your prospect, your products, and your market.  Engage in some careful fact finding to identify the true needs of your client.  Then, begin your “pitch” while staying on track throughout the conversation until you reach the conclusion.  You will find that if you accomplish these steps, closing the sale will be the obvious and normal conclusion you and your client reach.