David Stone on RIA Intel: “The better [advisors] do with the portfolio… the cheaper it gets for the client”

CDAs Are Ready for Their Moment

RIA Intel recently ran a piece covering Constance, the new contingent deferred annuity RetireOne is offering in partnership with Midland National. In the article, Holly Deaton talks about annuities in general and CDAs specifically, and the challenges they face in the market, as well as some of the outdated perceptions around them.

Deaton counters this with plenty of quotes from David Stone, who speaks of the need for CDAs in the marketplace, the role they can play in generating retirement income and de-risking portfolios, the ways in which Constance addresses issues that have historically been associated with CDAs, and the specific benefits for financial advisors.

Deaton also interviews Dr. Wade Pfau, whose recently-released white paper, “Unbundling Investments from Insurance to solve for Lifetime Sequence-of-Return Risk,” investigates sequence of return risk, its relationship to the “fragile decade,” and how a CDA may help. Regarding the utility of the CDA, she shares this from Dr. Pfau:

“If the market does really well and your portfolio earns 40 percent, the insurance means you’re going to get between 38 and 39 percent return net of fees,” Pfau said. “If the market dropped 40 percent, that’s the fragile decade. You’re likely to run out of money in that type of scenario if you end up having a reasonably long [life].”

One inaccuracy worth pointing out: in the article, Deaton says, “Advisors do not need an insurance license to offer Constance to their clients.” This is partially right; advisors do not need an insurance license for their clients to make use of Constance. However, it should be clarified that the advisor does not offer Constance; they refer their clients to us and, after determining whether or not Constance is the right fit for the client, we make the offer.

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