Book Appointment

A New Investment to Get Off The Wall Street Coaster

Season #2

Wanna get off that Wall Street roller coaster? This new investment from a leading ETF provider might be your ticket. Join us this week as we explore the new world of Annuity Alternatives.

In the world of cutting-edge technology, ChatGBT and AI have been making waves, but these innovations are nothing new. Guess what? I've been using the thing behind Chat EBT for almost a year and a half now. And we've been using AI in our firm for, I don't know, 10, 12, 15 years.

While AI has been around for some time, it wasn't until the advent of publicly available tools like ChatGBT that it became easily accessible to the masses. It's not that it was something really that new, the ability to have an AI that was able to write texts. Yeah, they did a really good job of it. But if you look at your phone, you had autocomplete. You had these little pieces of that built into tools all over the place. It just took somebody to come along and use it in a way that nobody had done before and make it a commercial success.

Up until very recently, the annuity world, the insurance companies had a lock on their ability to create this investment vehicle, but what's happening right now is something that I think is similar to what happened with ChatGBT. Someone came along and used a technology that was already available and made it a commercial success in a new way.

As someone who has worked in the financial industry for many years, I have always believed that insurance is an important tool. For a long time it was one of the few good options for conservative investors looking to protect their downside while still participating in the market's upside.

Annuities Are No Longer The Only Game In Town!

Annuities and other insurance products have been around for decades, and they have served their purpose well. But over the past few years, there has been a shift in the industry. New companies have emerged that are offering similar products, but with access to a broader range of investments, better upside participation, less fees and hassles than what traditional insurance companies could offer. These new players are disrupting the industry and forcing insurance companies to adapt.

In the world of AI, ChatGBT took technology originally developed by Google, packaged it up in an easy-to-use way for everyday people. Overnight, they had a hundred million users, making them the fastest company to reach that milestone in history. The reason for their success is simple – they offered something that people wanted. It was innovative, useful, and cool. And now, other companies are following suit, trying to get a piece of the action.

This competition is good for investors. It means they have more options to choose from and can find a product that best suits their needs.

In the investment world, It also means that insurance companies have to up their game and create better products to compete.

What is an Annuity

At its core, an annuity functions much like a bank CD, with the added benefit of market-based returns. You give the insurance company a certain amount of money, and in return, they promise to grow that amount by a fixed rate or by a percentage of any market gains. But what sets annuities apart is their unique offering of downside protection.

Unlike CDs or exchange traded investments, annuities guarantee that you will not lose your principal. This protection is invaluable for those looking to safeguard their hard-earned money.

How Do Annuities Provide Guarantees

The big question that any investor should have when hearing about a guarantee, is to question the mechanism of the guarantee. Anybody can spout promises, it is the ability to deliver that really carries weight.

Insurance companies deliver on their promise by entering in to massive contracts with investment banks. The insurance company takes ones side, the investment bank takes the other. One bets that the market will go up, the other that it will go down. Buy enough of these contracts and you can effectively create a hedge. This allows insurance companies to participate in the market's upside without accepting too much downside risk. They then pass on some of the returns to consumers, who can benefit from growth potential without worrying about losing their entire investment.

And like a good hedge fund, the insurance companies take a hefty fee for their services. In addition to your life insurance and administrative fees, they also take a performance based managed fee, usually called a spread. In many ways this is similar to the 2/20 arrangement of hedge funds, where the fund takes a 2% management fee, and the 20% of all growth above a specified amount. The insurance companies have a bit of a richer arrangement, since they also cap your max growth, whereas a hedge fund does not.

Everything Carries Risk

Of course, like any investment, there are risks involved.

Even seemingly safe investments like annuities and bank CDs can carry risk. If the insurance company offering the annuity goes bankrupt, the investor may not receive their full investment back. Similarly, if a bank experiences a run and the investor is not protected by FDIC insurance or SIPC protection, they may lose a portion of their investment.

Brokers are often limited by regulations from the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in what they can say about the risk associated with different investment vehicles. Annuities are regulated by the Department of Insurance and they have lobbied hard to be excluded as investments.Allowing them to market and make promises that ordinary investments cannot make.

This has allowed Annuities and Bank CDs to attract investors with their promise of downside protection. However, annuities come with lots of drawbacks, including lock ups, surrender charges, limited growth, and potentially high fees.

An Alternative to Annuities & Bank CDs

Enter Shielded Growth products. These innovative financial instruments offer a compelling alternative to annuities, providing downside protection while still allowing for growth potential. Rather than locking up your money in a fixed annuity, Shielded Growth products offer exposure to the stock market while limiting your risk of loss.

While Shielded Growth products may not provide the same level of guaranteed income as annuities, they offer greater flexibility and the potential for higher returns. Investors can benefit from market growth without worrying about catastrophic losses, making Shielded Growth products a compelling option for those seeking downside protection.

Of course, as with any financial product, it's important to carefully consider your options and work with a trusted financial advisor to determine what's right for your individual needs and goals. But for those seeking an alternative to annuities, Shielded Growth products may offer the best of both worlds - protection and growth potential.

How Annuity Alternatives Work

But how do they work? Like annuities, Shielded Growth products use similar contracts to insurance companies. They make big, individual contracts with other institutional investors. Providing for per-defined, market upside participation and downside protection. These contract are then sliced and diced in to smaller shares and sold directly to investors. Ideally you would purchase these in something like a Unit Investment Trust, or directly in your account, though there are less efficient investment vehicles in use. Since you own these individually, you can see them at any time in your account. And since the are actual contracts on the market, they can be sold at any time. Most of the time the issuer will offer to purchase it back at the current market value.

Where Can You Purchase a Annuity Alternative

In the past, such investments were only available to large institutional investors due to the high cost and complexity of the contracts involved. Now, with the emergence of exchange-traded funds (ETFs) and similar products, investors can purchase these annuity alternatives in small increments, making them more accessible to the average investor.

Currently there are only a limited number of advisors who are offering these, but that world is growing. At Yields for You we launched a website to help people get direct access to these investments at low prices, that site is:, 

Unlike traditional annuities, these products allow for greater participation in market gains while providing downside protection. They also offer greater flexibility, allowing investors to move in and out of the investment as they please, unlike the long lock-up periods required by annuities. Additionally, these annuity alternatives are guaranteed by the exchanges on which they are traded, reducing the risk of single-company failure.

While these annuity alternatives may not be suitable for all investors, they provide an interesting option for those seeking annuity-like benefits without the drawbacks. As these products become more widely available and better understood, they may provide a valuable addition to the investment landscape.

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