Rich Romano is the CEO and founder of FidX. Rich is responsible for the company’s strategy, vision, and growth. Passionate about helping advisors deliver better outcomes to their clients, Rich is leading his team to revolutionize the way insurance products are used to achieve client retirement goals within wealth management. More information about FIDx is available at https://www.fid-x.com.
Russ Alan Prince: How are the Envestnet Insurance Exchange and FIDx creating a truly holistic, unified solution for managing annuities in client portfolios?
Rich Romano: At FIDx we strive to make annuities a part of every conversation. We create a single platform experience to evaluate accumulation and decumulation strategies in a total portfolio, which allows financial professionals to create outcome-based strategies tailored to the needs of their clients. Without a platform like FIDx, annuities are often held outside of the client’s core portfolio and managed like a separate asset. This makes it more difficult for advisors to illustrate the impact an annuity can have on the client’s long-term success.
Once the contract is issued, the annuity is included in a consolidated report along with the rest of the assets. We talk about FIDx as a platform—which is what it is—but we really see it as a way to enable more savers with the power of knowing they’ll have the income and protection they need to maintain their lifestyle and create a legacy.
Annuities come in a lot of flavors—including variable, fixed, and indexed. In order for advisors to help their clients understand which type of annuity would be best for them, planning is critical. When clients start their journey with a financial plan, the end goal is to solve for a need—for protection, for income, or for legacy. This leads to the benefit they are trying to secure, and then the FIDx platform makes the selection seamless by helping them see which products are available to them. After the contract is issued, the advisor can monitor all aspects of the annuity through the platform.
Our technology also powers the Envestnet Insurance Exchange, which allows advisors that rely on the Envestnet ecosystem to easily access and manage annuity products from high-quality insurance carriers within an end-to-end digital experience, without the need for logging into multiple systems.
Prince: What do advisors need to know about annuities—the pros and cons?
Romano: Annuities are an often overlooked, and misunderstood asset class. Annuities are one of the only products that can guarantee retirement income, making it an essential part of a successful retirement plan.
Another thing advisors should keep in mind is that annuities can work in all different types of market scenarios, they’re not just times of volatility. Of course, when markets are volatile, annuities can be a great way to manage downside risk. But newer products, like Registered Index Linked Annuities, are designed to take advantage of up markets as well to help people accumulate wealth.
We say this a lot, but people are living longer, better lives, and are on track to outlive their savings. When they think about how they can secure their future for retirement, a guaranteed income is something that’s going to help get them there—and annuities offer that in a couple of different ways.
The biggest con around annuities is the stigma. They have always been viewed as very opaque, confusing, and complex. Education is key for helping investors and advisors understand annuities and FIDx breaks down a lot of the process barriers that have been around for so long.
Prince: What additional types of innovative income and protection solutions should advisors offer for client portfolios, and why?
Romano: If there is anything we learned from the pandemic, it’s just how unpredictable life can be—and how uncertain situations can seriously affect income and financial security. This has provided advisors with the opportunity to demonstrate their value by offering appropriate solutions to meet client needs in any situation and has also sparked some new questions from clients about life insurance as well as long-term care.
There has been a lot of innovation in the income and planning space over the last few years. Registered Index Linked Annuities continue to be the fastest growing product in the segment and we’re seeing more and more carriers attach income benefits to them. Beyond annuities, issuers have gotten more creative about how income can be taken from life insurance policies. Income from those products often includes a host of tax benefits. Regardless of the product, we believe they should all be viewed side by side so that the advisor and client can together determine the most appropriate income and protection product for their needs.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.