Why Hasn't my Advisor Recommended FIA's

You may wonder why fixed index annuities (FIAs) haven't been recommended by your financial or investment advisors. There are several reasons, and most of them relate to how advisors are compensated.

Most financial advisors earn income through annual management fees on assets under management (AUM).

• Typically, advisors charge around 1% of your account balance each year, sometimes more. 
• These fees are recurring—collected every year, for as long as your money stays in their accounts. 

In contrast, when an FIA is sold, the advisor usually receives a one-time commission, sometimes called a finder’s fee.

• After that, there is no ongoing payment to the advisor from your account. 
• From a purely financial standpoint, advisors who earn annual fees have an incentive to keep your money in market-based accounts. 

With market-based accounts:

• You assume all the risk of market fluctuations 
• The advisor earns income regardless of market performance 

With Fixed Index Annuities:

• The principal is protected, and you may earn market-linked growth 
• Advisors do not receive ongoing fees, even though the product reduces risk for you 

It’s important to look at the data:

• Studies show that over a 15-20 year period, less than 5% to 8% of actively managed funds and professional advisors consistently beat the market (S&P 500)
• The vast majority- roughly 92% to 95% - underperform their benchmarks over the long term, particularly after accounting for fees.

Key factors affecting performance include:

• Management fees charged by the advisor (around 1% annually) 
• Internal fund expenses inside mutual funds 
• Inability to consistently pick winning stocks faster than the market average

To outperform the market after fees, an advisor must beat the index by more than their own costs, which is extremely difficult over time.

• Advisors often recommend market-based accounts that generate recurring fees for them, even though there’s no guarantee you’ll outperform the market. 
• Fixed index annuities offer market-linked growth with protection and optional lifetime income, but they do not generate ongoing fees for advisors. 
• This creates a misalignment of incentives: the advisor may benefit more from you staying in market-based accounts than from recommending a protective strategy like an FIA. 

Choosing a financial product should be based on your goals, risk tolerance, and retirement needs, not on whether it generates ongoing fees for an advisor.

Fixed index annuities can be a powerful tool to protect your assets, grow them tax-deferred, and provide guaranteed lifetime income, but because they don’t produce recurring advisor fees, they are often underrepresented in traditional investment recommendations.

Myth: My advisor does a great job because my account value has been going up over time.  Most individuals don't realize that they could have accomplished the same success and possibly even have greater returns by simply investing in a low cost S&P 500 Index Fund.  

Click below link to see the article from Yahoo Finance describing how "The typical investment adviser can't beat the S&P 500"