Bank Reps Warm Up to Immediate Annuities
April 19, 2008
Immediate annuities aren’t the first product that springs to mind when most bank-based reps develop retirement packages for clients, particularly since the annuities carry only a small commission and generally have no trail.
But some bank reps are finding that income annuities can be the ideal way to make sure clients do not outlive assets, American Banker reported.
Rich Reiser, an adviser for Investment Centers of America Inc. at a branch of Decorah Bank and Trust in Iowa, is one. In 2007 he sold $1 million of single-premium immediate annuities (SPIAs)—a significant sum considering that U.S. banks sold a total of only $351 million of the products in 2006.
One of his clients was an 81-year-old woman with $300,000 in deferred variable annuities and a house worth about $100,000. "She was spending $2,000 a month and was worried about running down her assets too fast," Mr. Reiser said.
Employing a split-annuity strategy, he exchanged $200,000 of the VA money into a 10-year period-certain SPIA paying $2,000 a month. That and Social Security covers her expenses and reduces her taxes, he said.
The other $100,000 is growing in a 10-year deferred fixed annuity. When income from the immediate annuity ends, he’ll buy another 10 years of guaranteed income with the assets in the matured fixed annuity. If his client needs more liquidity, she’ll tap her home equity with a reverse mortgage.
"[SPIAs] don't make you much money in terms of commission, but I'm not thinking about my interests when I recommend these things," Reiser said. "I'm looking at what's best for my customer."
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