As financial professionals, our credibility comes from being clear, accurate, and client-focused. One area where we can make a big impact is how we describe annuities with crediting strategies based on indexing. A little extra care in our wording can help reduce “not-in-good-order” submissions and ensure our clients fully understand what they’re getting.
What Clients Need to Know
- Fixed Indexed Annuities (FIAs): Clients aren’t in the stock market. Their money is protected from market losses (unless withdrawals, fees or certain riders apply). Interest is credited based on an external index, but always subject to caps, spreads, or participation rates, as applicable.
- Registered Index-Linked Annuities (RILAs): Similar concept, but with some downside risk in exchange for potentially higher upside. Still, money is not directly invested in the index.
Key reminder: Key Point: In both cases, the annuity contract is a promise from the insurance company. The index is just part of a formula used to determine interest credits—not an actual investment.
How They’re Different
- Stocks, ETFs, Mutual Funds: Direct market ownership. Full risk, full reward.
- Indexed Annuities: Insurance contracts. No ownership of the index or securities.
- Variable Annuities: Invest in subaccounts (like mutual funds) with full market risk.
Phrases to Avoid and Better Alternatives
| ❌ Avoid Saying | ✅ Consider Saying |
| “Participates in the market” | “Index-Linked” |
| “Invested in the index” | “Index Options” |
| “Stock market returns without the risk” | “The index is used only as a benchmark to calculate potential interest.” |
| “Invest in the index” |
Why This Matters
Clear, consistent language builds trust, prevents client misunderstandings, and keeps us compliant. By setting the right expectations from the start, we protect our clients, our reputation, and our business.
Please reach out to the ESI Suitability team with any questions at 1-800-344-7437, option 5 then option 2.
