So there's, I know there's a lot of different types of annuities. Maybe you could kind of run over the general two or three that are very popular. Yeah. So again, an immediate annuity, you're not going to have a fee. You're just going to get a determined payout rate right off the bat. The index annuity, again, you don't pay fees, but they limit the upside potential via the caps, the spreads and the participation rates.
And then a variable annuity, although you can invest in the stock market and the bond market, they will have the fees attached. How do you evaluate and treat annuities with new clients? Yes, absolutely. So new clients, many of them come in with annuities from different advisors that they've worked with over the years. Some of those will have no surrender charges. Some will have high fees. Some will be indexed annuities.
Some will have guaranteed riders that we want to evaluate each one individually to determine the pros and cons of maintaining that annuity for them. So what we'll do is we're going to review and analyze each annuity individually for the pros and cons for that client to determine where it might fit in to their overall portfolio, and then determine, is it worth it to maintain at the higher fees versus investing separately for that client?
So what would be an example of an analysis that you've worked on with a client where you determine to keep an annuity, for instance? Yeah. So again, we've had many clients that come in with annuities. A good example is a client that brought in a variable annuity that actually had higher fees. However, they had a guaranteed withdrawal benefit rider attached that had the accumulated benefit portion. And that dollar amount would have been very difficult for us to ever beat.
And therefore, we decided to maintain that annuity. That client is actually taking the distributions and reinvesting them with us at Vector. Got it. So that's part of what you do with clients, right? You analyze annuities to determine if it makes sense to hold them or if they might be better off surrendering them, paying the fee that is associated with that, and then reinvesting into our strategies.
Exactly. We're always trying to figure out what's the best route for our clients and whether or not they should maintain their investments or not. As fiduciaries, that's a big part of what we do. We really want to determine what is it for you as a client that is best in your individual interest. Who is guaranteeing these benefits? benefits? Good question, Scott. So the guarantee is simply backed by the annuity company itself.
So you're going to want to definitely make sure that the annuity company you are working with has a high rating. So they have the ability to actually pay that benefit back to you in the future. If they're not a great company and they go underwater, you may not get the value of that guarantee in the end. The only extra value that you have is the state guaranteed annuity associate. year. Mike, I appreciate your time. Hopefully everybody watching does too.
And it's been very informative. Thanks. Thanks again. Thank you, Scott. Hey, thanks for listening to our podcast. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities investments or investment Be sure to consult first with a qualified financial advisor and or a tax professional before implementing any investment strategy.