One of the most important conversations you’ll have about managing a client’s finances is what portion of their money should be used for “risky” investments to maximize growth potential and what portion should be kept “safe” to ensure preservation of capital when the markets get turbulent. This foundational conversation is about finding the right balance, taking into account your client’s long-term financial goals and temperament for overall financial risk.
For the risky portion, it is typical for advisors to recommend stocks and stock mutual funds. For the safe portion, a typical recommendation is money market accounts, certificates of deposits or — perhaps the most common choice — bond mutual funds.
However, for many clients, there is a lesser-known but better alternative than bond funds: a fixed annuity. Why is it better? Because a fixed annuity can provide clients with a similar rate of return than a bond mutual fund, with greater safety.