Access a wide range of strategies to align with individual investors' goals and risk tolerances.
Overview
The benefits of custom indexes
Tailored to your goals
Flexibility and control
Added flexibility for investors to customize portfolios according to their preferences and values.
Risk management
Improve portfolio diversification and resilience by selecting assets with lower correlations.
Understanding custom indexes
A fixed indexed annuity (FIA) is an insurance product that provides growth potential for your money while mitigating the risk of negative returns. The annuity’s interest, or growth, is driven by the performance of an underlying index, like the S&P 500. Most FIA’s offer index options beyond the S&P 500 to access different market exposures that can help provide diversification benefits – this is where custom indexes come in!
Custom indexes can provide exposure to a wide range of asset classes, like stocks, bonds, and commodities, and they often have added features that make them optimal for use in an FIA. Below, we break down some of those features and the potential benefits of using a custom index.
Education
Custom Index Education Series
Let us guide you through the intricacies of custom indexes. In this educational piece, we cover everything from the fundamentals to more advanced concepts in short, easy-to-understand installments.
Unlock the potential of excess return indexes
What are excess return indices and why are they commonly used in the insurance-linked index space? How do they differ from total return indexes?
Download our guide to learn how excess return indexes work, their potential benefits, and how they can help you achieve your long-term goals.
Take control of market ups and downs with volatility control
Are market fluctuations keeping you up at night? Volatility control in custom indexes may be the answer. But what is volatility control, exactly? And how can it help you ride out market ups and downs with more confidence?
Download our guide to learn how volatility control works, including its potential to stabilize option costs, manage risk, and improve policyholder outcomes.
Its not what you make... It’s what you keep
Performance is not the whole story when it comes to a fixed index annuity; the interest crediting strategy will determine how much return you ultimately get to keep.
Download our guide to see the importance of keeping what you make in fixed index annuities.
Index essentials
A fixed index annuity (FIA) is an insurance contract that provides growth potential for your retirement savings but without down market risk.
FIAs can offer fixed and index-linked crediting strategies. The fixed-rate strategy is tied to a pre-determined interest rate. The index-linked strategy is tied to a market index, like the S&P 500. Many FIAs include index options beyond the S&P 500 to access different market exposures that can help provide diversification – this is where custom indexes come in!
Custom indexes can offer exposure to multiple asset classes, geographies, investment themes, and return profiles. This can help provide clients with differentiated products that are tailored to their needs and investment interests. In addition, custom indexes can add diversification to an allocation – the idea of not putting your eggs in one basket.
Volatility measures how much the price of an asset fluctuates over time. Volatility control is a feature of a custom index that attempts to maintain a specific volatility target, like 5%, by adjusting exposure daily between stocks (most volatile), bonds (less volatile), and cash (least volatile). In general, the lower the volatility target, the more attractive the participation rate will be, but this also means that the index will have a lower exposure to stocks over time and may offer less growth potential.
1. S&P 500 Daily Risk Control 5% TR Index. The S&P 500 Risk Control™ series relies on S&P 500® methodology and overlays mathematical algorithms to maintain specific volatility targets. Index exposure is dynamically rebalanced based on observed S&P 500 historic volatility to maintain various volatility targets.
2. S&P 500 Daily Risk Control 7% TR Index. The S&P 500 Risk Control™ series relies on S&P 500® methodology and overlays mathematical algorithms to maintain specific volatility targets. Index exposure is dynamically rebalanced based on observed S&P 500 historic volatility to maintain various volatility targets.
3. Participation rates are hypothetical and not indicative of actual rates. Actual participation rates may vary.Fixed indexed annuities are insurance contracts, not registered securities or stock market investments. Fixed indexed annuities are not invested in the index itself, but rather interest is credited based on the performance of the index and the rules prescribed in the insurers index crediting strategy. Fixed indexed annuities are not issued by Franklin Templeton.
In FIA’s, participation rates directly impact what you make versus what you keep. The S&P 500 index offers 100% exposure to the stock market and may produce higher returns compared to a volatility-controlled index, but the participation rates will generally be lower. In the example below, although the S&P 500 saw the strongest performance, it had a 43% participation rate, and this resulted in “keeping” less of the return over the nearly 25-year period compared to the 5% and 7% volatility-controlled options. Please keep in mind that the "what you keep" account values represent the compounded 1-year, par-rate adjusted returns for each index. Each 1-year crediting period measured calendar year returns (i.e. the most recent 1-year period measured from 12/31/2023 to 12/31/2024).
