Two Year Point 2 Point VS. 1 Year?? Thoughts Please

[0b1kanobee]

I was having a recent discussion with the JN rep recently and he was saying how much 'better' a two year point 2 point was vs. a yearly point 2 point with regards the index strategy. Basically you are broadening the time frame according to him or looking at the index through a larger picture yada yada yada...

He used the last ten years and compared a yearly with a bi-annual and the numbers do come out better (I took his word for it) but I don't see how this holds true. Another words, what about the previous ten years before the last ten years, so on and so forth. He hadn't run those numbers yet, hummm.

Any opinions on this strategy without getting into what the caps are and minimum interest ect. ect. I don't see how it makes a difference in the grand scheme of things. The products are designed to fetch, say 3% to 6% interest earnings. Do any of you think a bi-annual beats a yearly or are you like me and suspect some fuzzy math based on only the last ten years in his example. As a side note, I did like the product but didn't think it was anything special compared to some of the other good ones out there.

 

[briko3]

In volatile markets, the 1 year does better and in stable markets the 2 year does better. It depends on what you think is going to happen. I think historically, the 1 year does better, but not by much.

 

[njh_lfg]

It all depends on your market outlook. It can be a blessing or a goat. In the current market with high volatility I would be uneasy using a 2 yr pt2pt. Look back at what happened in 2008; if you used this strategy starting in 2006 your client would be pissed they received no interest and on the other hand if you put it in place in 2008 during or after the swift downturn a client would be rather happy of capturing the entire cap in gains.
Anyone who is paid to promote a product can make **** smell like roses. This is the main reason I do not attend any carrier sponsored "trainings", hell I do not even let regional vps of the carriers I have GA contracts with inside my office unless they give me their presentation before allowing them play with my agents minds. You have to do your own homework and make objective decisions on what products you offer to clients.

 

[ATM]

How does a 2yr affect the compounding? Does the client get interest credits every two yrs vs one? and what about when they take money out? Let's say I'm taking distributions, does that affect how much interest I get since I've taken out twice as much over two year?

I haven't thought it through but it seems that I would want my interest credited and locked in as often as possible.

 

[padthaiforlunch]

I haven't thought it through but it seems that I would want my interest credited and locked in as often as possible.

Yes, unless the 2 year ptp has really high caps. I remember when Equitrust had 100% participation rate using the 2 year point to point.

Without discussing rates, the question is meaningless.

 

[0b1kanobee]

Yes, unless the 2 year ptp has really high caps. I remember when Equitrust had 100% participation rate using the 2 year point to point.

Without discussing rates, the question is meaningless.

Ok well the cap is 11.5% and 100% participation. It's a JN product, you should or somebody here should know it. Is that enough to go on?

 

[Norwayguy]

Ok well the cap is 11.5% and 100% participation. It's a JN product, you should or somebody here should know it. Is that enough to go on?

But the cap is 11.5% over 2 years or similiar to a 5.75% annual cap. There are pros and cons to the longer term pt2pt strategies...The biggest thing is knowing your client. I have had some clients and even if the gain over 2 years would be guaranteed to be double, triple or more than the 1 year product they would have a problem with going more than a year without anything happening to their account.

 

[0b1kanobee]

But the cap is 11.5% over 2 years or similiar to a 5.75% annual cap. There are pros and cons to the longer term pt2pt strategies...The biggest thing is knowing your client. I have had some clients and even if the gain over 2 years would be guaranteed to be double, triple or more than the 1 year product they would have a problem with going more than a year without anything happening to their account.

Good point which is why I usually allocate some $$$ to the fixed bucket and explain away as much as possible. Like you say though, there are some clients who couldn't even wait one year so again I usually allocate $$$ to the fixed bucket, even if it is just 10%.

 

[padthaiforlunch]

11.5% over two years doesn't stirke me as worth the two year wait. The EQ I mentioned earlier had no cap and 100% participation. Clients earned all the gain in the market over the two years.

As was pointed out, the 11.5 is equivalent to 5.75 per year. Can you find an annual point to point of with a cap of 5.75? Then why would you make the client wait two year before crediting the account?
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Are you restricted to certain carriers?

 

[lbritt]

I'm with ATM. The power of annual reset is unique to FIAs and is something I'd rather not part with. I'd rather use a MPTP cap of 3.15% on Annual Reset than a 2YRPTP with the same cap.
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Just saw that the new Aviva product will have both the 1yr MPTP and 2yrPTP. I guess it's popular enough for them to consider it.