Understanding Annuity Products with an Annuity Education

In finance, an annuity certificate is a highly demanded asset for financial advisors. Many advisors do not have the annuity education they need to understand the products they are selling such as fixed-rate and variable annuities. An annuity certificate can provide substantial positive impact on your financial advisor career.

Qualifying portfolio management is difficult. Each year, Morningstar selects a "Portfolio Manager of the Year." A 2000 study looked at the subsequent performance of these star managers: only slightly more than 50% of them outperformed their peers, and those who tried to time the market had the least reliable returns (source: Bryant, 2000).

Mutual fund portfolio managers who have returns higher than their peers tend to:

--Be individually identified to shareholders
--Be known for their investment style
--Are younger than average and well educated
--Have longer-than-average tenure with the fund they oversee (source: Chevalier and Ellison, Journal of Finance, June 1999).

Earning your annuity certificate will further your education and increase the likelihood that you will pursue a successful career as a portfolio manager. An annuity education will also help you further understand the intricacies related to the analysis of the following case studies:

Mutual funds with superior peer returns generally have the following characteristics:

--Below-average asset size and above-average stability
--Below-average systematic risk
--High tax efficiency
--Below-average expense ratios
--Comparatively steady returns over time (note: these qualities are consistent with value investing).

These findings indicate fund managers have good stock selection abilities-it is cash holdings, securities transactions, fund profitability and overhead (all things an index does not incur) that bring returns down below an index. This is somewhat consistent with Bogle's 1999 findings that 92% of the shortfall of active funds (vs. index funds) was due to expenses. Wermers went on to point out the gross return advantage was completely lost if adjusted for their higher risk (compared to the index).

Over a 25-year period, returns for the top-performing 30 funds were compared to their subsequent 5-year periods for five subsequent periods. In each case, the S&P 500 out-performed the top 30 funds from the previous 5-year period. One observer wrote: "The 5-year 'alpha man' became 'ape man' over the next five years" (source: Bernstein, 1995). An annuity certificate can also help provide insight that others lacking such education may not be able to assess. An example of this is in the following case study:

Funds over the period 1987-1996 were divided into two broad categories: popular (funds with highest percentage net cash inflows) and unpopular (funds not widely held). Study results showed 78% of the unpopular funds for any given year outperformed the typical equity fund over the next one, two and three years; results were consistent for 24 of 27 periods studied (source: Paluch and Kelly, 1996).

In a sequel study using the same criteria, unpopular and popular funds for the period 1987-1999 were compared. Again, unpopular equity funds did better than popular equity funds 78% of the time. Furthermore, 89% of unpopular funds outperformed the then currently most popular fund (source: Barbee, 1999). The study's author concluded, "This (contrarian) strategy is the closest investing gets to a sure thing." This strategy was reconfirmed by a 2000 study (source: DiTeresa, 2000).

An annuity education is a significant way to increase your knowledge of the financial products you sell. Earning your annuity certificate will allow you to differentiate yourself from the competition.