Your Thriving Practice

How to Have the Down Market Conversation with Your Clients

Help clients focus on retirement growth, NOT recovery from market losses.

What kind of conversation do you have with a client after a down market? You probably talk about “a long-term perspective,” “buying opportunities” and “actively managed accounts.” But it is still a difficult conversation, especially as your client recognizes that they first need to recover from losses before they can see actual growth.

But what if you could help that client focus on the growth opportunities instead of the recovery needed after losing money?

“It’s easier to grow money when you don’t lose money.”

If a portion of that clients' portfolio was invested in a fixed index annuity (FIA), that conversation after a down market might be easier.

Recovery from a market downturn would not be needed for the FIA portion of their portfolio, since an FIA is protected against market-based losses. Unlike unprotected assets, there would be immediate opportunity for growth during any market upswing.

After all, it’s easier to grow money when you don’t lose money. 

No such thing as a sure thing?

Without a crystal ball, no one really knows for sure what the next year will bring. However, there are two things we do know for sure. One – it always takes a higher percentage of growth to make up for losses. And two – an FIA will never need to recover from market-based losses in order to see growth.

Why? Because with an FIA, you’re not actually purchasing shares of any index, stocks, bonds or other market investments, so you’re not subject to the volatility of unpredictable losses.

What does “no recovery” growth look like?

Take a look at the following chart – which compares a hypothetical FIA product (with annual crediting periods) against S&P 500 returns adjusted for inflation.

In the years when the S&P 500 lost value (2000, 2001, 2002, 2008 and 2015) the FIA retained its value and simply received zero interest credits for those years. However, during the years when the S&P 500 gained value, the FIA also increased, though potentially to a lesser degree.

Down market client conversations

This chart assumes no fees, charges, or withdrawals are taken from the FIA during the illustrated period.

Index past performance is not indicative of future results. The hypothetical performance of the fixed index annuity, as illustrated, assumes a $200,000 premium, a cap of 6% (using the One-Year Point-to-Point with Cap crediting method only) and assumes no withdrawals or surrender charges during period shown.

This hypothetical example is for illustrative purposes only and not intended to be the performance of any specific product.


With an FIA you can “reset” instead of “recover”

An FIA offers index-based, interest crediting strategies that lock in any positive gains at the end of the strategy term. If the index has negative performance for any strategy term, your client’s money is shielded from losses. In other words, their contract value won’t decrease due to negative performance and there’s no recovery necessary. Each crediting period, the index’s ending value becomes the next crediting period’s starting value. This means your clients may continue to earn interest on their contract value without having to recover from any prior year’s market loss. This is known as a “reset.”

Having a fixed index annuity as part of a retirement strategy can help your clients mitigate losses during down markets, and can provide “no recovery” upside growth potential during positive years.

Have a different client conversation

As you work with clients to create a strategy that aligns with their retirement goals – consider a conversation about adding a fixed index annuity to their portfolio.

In addition to downside market protection and growth potential – a fixed index annuity could also provide protected lifetime income for your clients no matter how long they live in retirement.

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