Top Economist Ibbotson Endorses FIAs

February 5, 2018

Top Economist Ibbotson Endorses FIAs

A new white paper by one of the most famous names in finance, Roger Ibbotson, is a major endorsement of fixed indexed annuities (FIAs), urging advisors to consider them as an alternative in today’s low interest rate environment.

“FIAs have many attractive features as both an accumulation investment and as a potential source of income in retirement,” Ibbotson writes*. “In simulation, the FIA performed better net of assumed fees than long term government bonds. We showed the FIA had comparable volatility to bonds but with better downside protection. In our study, when bonds underperformed, the FIA performed quite well.”

Ibbotson, Ph.D., is emeritus professor in the practice of finance at Yale School of Management; founder and chief investment officer at Zebra Capital Management, an equity investment and hedge fund manager; and founder, advisor and former chairman of Ibbotson Associates, now a Morningstar Company. He is renowned as a pioneering analyst of the equity risk premium and as co-author of the annually updated “Stock Bonds Bills and Inflation,” a standard reference for information and capital market returns.  

‘Powerful and More Affordable’

In his newest white paper, Ibbotson acknowledges that much of his own research has become conventional wisdom but that accepting conventional wisdom can be problematic when it prevents you from considering other alternatives. He writes that annuities for a long time have deserved a place in retirement portfolios but that the industry has evolved to make them more flexible and attractive.

His research, detailed in the “Fixed Indexed Annuities: Consider the Alternative” white paper, in several simulations shows that FIAs can be a “powerful and more affordable” option than traditional fixed income bonds to not only mitigate retirement risks but also to serve as a wealth accumulation vehicle.

His research dovetails with the previously released Senior Market Sales® (SMS) white paper, “The New World of Fixed Indexed Annuities,” which highlights industry innovations that have pushed the product’s popularity among financial advisors.

Is an FIA Heyday Ahead?

Consumers are responding to the new product innovations. And the mainstream recognition of the power of FIAs is further evidenced as more financial writers suggest that consumers consider allocating a portion of their portfolio to financial products such as FIAs.

Ibbotson’s research comes just weeks after market guru Bill Gross declared the beginning of the bond bear market.

“Ibbotson’s white paper marks a major victory in the industry,” said Chris McDonald, SMS’ associate director of Institutional Sales. “Not only are fixed indexed annuities becoming more mainstream, but now one of the most famous enconomists — a major influencer — is also endorsing them as a powerful fixed-income alternative in a retirement portfolio.”

At a time when acting in the best interest of clients is paramount, Ibbotson’s endorsement is especially encouraging for agents and advisors using FIAs, McDonald said.

Learn More About FIAs

To learn how FIAs can be the right safe-money alternative for some clients, download "The New World of Fixed Indexed Annuities" white paper or call a marketing consultant at 1-800-786-5566.

You also can use SMS’ new retirement planning tool, Income ArchiTech™, to perform a portfolio analysis and conduct stress tests to identify opportunities to better prepare your clients for a market downturn.

Call a marketing consultant today at 1-800-786-5566 to get access to Ibbotson’s white paper or to learn more about Income ArchiTech.


*“Fixed Indexed Annuities: Consider the Alternative”, Zebra Capital Management, LLC, January 2018.

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