As investment advisors seek to optimize portfolio returns and explore new strategies, there is growing interest in the potential adoption of multi-year guaranteed annuities (MYGAs). An article by ThinkAdvisor discusses the benefits and considerations of incorporating MYGAs into investment portfolios.
MYGAs offer a guaranteed return for a specified period, typically up to 10 years, and provide tax-deferred growth. With the recent rise in bond yields and the increasing importance of asset location, MYGAs have become more attractive to investment advisors. Fee-friendly MYGAs, which have little to no fees, offer higher yields compared to commissionable strategies.
Sales of MYGAs have seen significant growth in recent years, indicating a rising interest in these annuities. Allocating a portion of a portfolio to MYGAs can potentially enhance risk-adjusted returns through higher yields and increased after-tax wealth growth. Additionally, MYGAs offer tax advantages when purchased in taxable accounts.
For investment advisors, allocating to MYGAs in fee-based accounts is similar to holding a static portfolio. MYGAs can also serve as a valuable learning opportunity for advisors to gain insights into the annuity landscape and products.
Given the competitive yields and tax benefits associated with MYGAs, the adoption of these annuities by investment advisors may continue to increase. As advisors seek to diversify their portfolios and optimize returns, MYGAs offer a fixed-income option with attractive features.
It is important for investment advisors to carefully evaluate the suitability of MYGAs for their clients' portfolios and consider factors such as investment goals, risk tolerance, and time horizon. Consulting with annuity specialists and conducting thorough due diligence is recommended to ensure that MYGAs align with clients' financial objectives.
Overall, the potential adoption of MYGAs in investment portfolios presents an opportunity for investment advisors to enhance risk-adjusted returns, benefit from tax advantages, and explore new avenues for portfolio diversification.