Independent Review of the AXA Structured Capital Strategies Variable Annuity – [November 2018 Update]
What’s Covered in this Review
In this review, we’ll cover the following information on the AXA Structured Capital Strategies annuity:
- Product Type
- Current rates
- Realistic long term investment expectations
- How it is used
- How it is most poorly used
Annuities can be complex. That’s where having an Annuity Investigator who loves math comes in.
We make the complex, simple.
What you will likely notice, is that like just about any other annuity, the Structured Capital Strategies Annuity can perform quite well in certain areas. But, there are other areas that may not be up to par, depending on your specific financial goals, time horizon, and risk tolerance.
If this is your first visit to our website and you aren’t familiar with us, we are fee-only financial planners – so we do not get paid to sell our clients annuities, nor do we sell these products. However, unlike other fee-only financial planners, we do feel that these products can provide some investors with a key piece of their overall financial planning strategy – as long as they are used in the proper manner. Because our pay is not tied to the sale of annuities, we have no real incentive for or against them. Therefore, our views are completely impartial and unbiased.
So, let’s get started!
AXA Structured Capital Strategies Annuity
Structured Capital Strategies
|Type of Product||Variable Annuity|
|Standard & Poor's Rating||A+ (Positive)|
|Phone Number||(800) 245-1230|
Opening Thoughts on the AXA Structured Capital Strategies Variable Annuity
AXA is one of the largest companies in the world. After more than two and a half decades in the insurance and financial services arena, AXA offers its products and services in 64 countries, and has more than 107 million clients.
For year-end 2016, AXA crossed the Euro 100 billion mark for the first time in the company’s history. This 2% growth over the following year was achieved while also keeping a focus on profitability.
Today, the AXA brand remains the #1 insurance brand worldwide (for the ninth consecutive year), and it is still part of the Top 3 Financial Services brands. The company has also continued to move up the ranking from 46th position to 42nd in terms of best overall global brand.
In general, variable annuities are supposed to do two things – grow principal and produce income. But the reality is that they aren’t very good at producing income. This is because of the risk that these vehicles present to both the investor and to the insurance company that offers the annuity.
In fact, because their value can fluctuate so much, insurance companies can actually guarantee less income than safer options like fixed annuities can provide. So in essence, for every dollar that you put into a variable annuity, it’s going to promise you less income that a fixed annuity would for the exact same money. With this in mind, if your primary goal is to produce income, then a variable annuity may not be the way to go.
On the investment side, a variable annuity can offer investors the opportunity of unlimited growth. But along with that also comes downside risk. There are also a number of fees. First, within a variable annuity, you are invested in mutual funds. These will generally have their own fees within the funds themselves. With this fund, the fee is between 0.61 and 0.71%.
But the annuity itself also charges a front-end sales charge – so investors immediately start off with a loss. This can make it difficult for your account to grow when it is starting from behind. Then you have the uncertainty of the market.
Over the years, investors who have had funds in the market have been worried about not meeting their retirement goals. This has been due in large part to the substantial volatility of the market, giving way to potential loss of investor principal.
The Structured Capital Strategies annuity has the ability to help investors to build long-term wealth with a tax-deferred structured growth strategy, while at the same time providing a built-in feature for protection of a certain amount of principal from downside market risk.
That’s because this particular annuity is “combination” of a variable and an index-linked deferred contract. So, in a nutshell, it allows investors to pursue the accumulation of assets via equities and other investment options up to a certain performance “cap rate.”
Investors can basically “customize” the strategy that works the best for them, based on the underlying index (or indices) that is suitable, as well as their preferred time frame, and level of protection that meets their individual needs.
What this means to the investor is that a portion of their account can be protected from downside risk, but it’s important to understand that in order for that portion to be protected, a limit on earnings will be placed on that money. When the index used grows, you’ll see a cap (limit on earnings), which might be a turnoff to some – especially when you take into account the account fees, which we’ll talk about later in this review.
Before we get into the gritty details, here is some necessary legal information that needs to be disclosed…
This is an independent annuity product review and it does not constitute any type of recommendation to purchase or sell an annuity. AXA has not endorsed this review in any way, and I do not receive any compensation for providing this review. This information is meant to be an independent opinion so that readers may see my personal perspective when determining the potential advantages and/or drawbacks of this particular financial vehicle, and how it may or may not fit into their specific financial portfolio. Prior to purchasing any type of investment or investment product, it is important to pursue your own due diligence and to consult with a competent and properly licensed financial professional before moving forward. This way, you can more precisely ensure that the product and/or service fits in with your individual circumstances. All names, trademarks, and materials that were used in this annuity review are the property of their respective owners.
How AXA Describes The Structured Capital Strategies Variable Annuity
Based on AXA’s website, the Structured Capital Strategies annuity is described as a variable and index-linked deferred annuity contract that is designed for balancing both personal risk tolerance with growth potential and protection of principal.
This annuity allows the investor to choose one of more segments to invest in, each providing a return that is linked to the performance of an underlying market index. Some examples of these include the S&P 500, the NASDAQ 100, and the Russell 2000.
The annuity also offers a pre-packaged segment selection. This can enable you to diversify investments across multiple securities, and in turn, lower the overall risk of the portfolio. There are actually three different pre-packaged segment selections to choose from. One includes more exposure to the large-cap asset classes via the NASDAQ 100 and the S&P 500, another offers more exposure to the International and Small Cap asset classes. These, however, are only available to choose at the time of contract issue.
Once the investor has chosen a suitable index to track, a segment duration and segment buffer can also be selected. The segment buffer provides built-in protection that can absorb up to the first -10%, -15%, -20%, -25%, or -30% of any loss. The investor then absorbs any loss that is in excess of that, should the underlying index perform more poorly in a given period.
The segment duration includes the segment start date to the segment maturity date. These are available in one, three, or five year time periods.
All of this is neatly laid out in the AXA Structured Capital Strategies brochure, which can be found HERE.
How Financial Advisors Might “Pitch” This Annuity
While variable annuities are not quite as popular today as they were several years ago, index annuities have grown a great deal in popularity – especially over the past three to four years. One reason for this is their “win-win” scenario of providing the opportunity for growth, along with protection of principal factor.
So, certainly one of the key features that are offered on this annuity – even though it is a variable product – is the fact that it also provides investors protection of principal, at least up to a certain extent, while at the same time offering the potential for growing funds based on market performance. Investors may also like the fact that they can transfer between investment options at the end of one, three, or five-year segments.
Although this is touted as a benefit or feature – an investor should keep in mind that in some cases, having a quarterly review with their advisor may not be often enough to make necessary changes to really make a difference when the markets are rising or falling. Now think about being restricted to making changes every one, three, or five years. It sounds like it might be too little, too late to really make a difference.
Likewise, because people are living so much longer today, one of the biggest fears on the minds of many retirees and investors who are saving for the future is running out of income. With that in mind, the guaranteed income for life is also a big selling feature here, as with any annuity.
If you plan to use this annuity as a source of income, you should take into careful consideration the projected income from this annuity. There are other products out there that will offer higher levels of guaranteed income and even greater protection from market downsides.
There is no perfect product or investment, so your priorities should be clear right at the start. You should know before signing any contract whether your objective is to create a source of income or to grow your money over time to build a legacy for your family, because as much as your advisor might lead you to believe that both can be done inside of the same account, the truth is quite the opposite.
It’s important to be careful, though. Why?
For one thing, this annuity can still be exposed to extensive market downturns – and along with that, investors can still suffer the loss of principal. With that in mind, you still need to take stock of your true risk tolerance prior to moving forward with this particular annuity contract.
Regardless of how an insurance or financial advisor might present this annuity to you – which quite frankly, will typically be in the best light possible – one way to really tell how a product performs is to read reviews from real customers.
In order to check out the AXA Structured Capital Strategies annuity reviews, go HERE so that you can see for yourself the good, the bad, and possibly even the ugly.
Also, because it has the index feature – and therefore the performance cap – you could be limited in your upside returns. If you’re wondering if this annuity is right for you, or if you have questions and need a little help getting pointed in the right direction; just reach out via our secure contact form here.
What About the AXA Structured Capital Strategies Annuity’s Fees?
Variable annuities tend to be some of the more expensive investment vehicles available, and the AXA Structured Capital Strategies annuity is no different. Investing in Choice Segments can provide you with access to higher Performance Cap Rates, and potentially greater Segment performance. However, this can also come at a cost.
For instance, according to the product’s fact card, “the cost to invest in a Choice Segment is 1% per year of duration. As an example, this cost would be 3% for a 3-Year Segment and 5% for a 5-Year Segment. However, the Choice cost is waived if your Index returns are negative, and is partially waived if your Index returns are positive but less than your applicable Choice Cost.”
The annual account fee will range from .65% to 1.25%. This is what you pay AXA to administer the account, send you statements, and take your phone calls when you have any questions – a hefty amount for simply answering the phone and sending out your account information.
Remember, you have intervals of three and five years when you can make adjustments to your investments, and this option also has a fee of 1%. Additionally, when those “Choice Segments” make a positive return, you will be deducted 3% from the returns on the three-year option, and 5% off the top of the earning for the 5-year segment.
Now, what about the investments themselves? Well, that’s actually the cheapest part of this whole account. The annual operating expenses for the portfolios you invest in ranges from just 0.61% to 0.71%, which leads us to believe that if you want capital growth, it’s very likely you could go out there and find similar investment options – if not the exact same options – and cut out the middle man completely.
In order to check out an exact breakdown of all of the fees and charges, you can check out a copy of the AXA Structured Capital Strategies Annuity prospectus right HERE.
The Annuity Gator’s End Take on the AXA Structured Capital Strategies Variable Annuity
Where it works best:
- When considering the AXA Structured Capital Strategies annuity, it can often work best in scenarios where an investor wants to be invested in the market, but yet is concerned with taking on too much market risk. This is because this contract will provide the ability to invest in equities, while at the same time offering a built-in downside protection feature.
- This product is also a good option for those who are worried about outliving their savings/income in retirement, as it provides a guaranteed lifetime income feature.
- Because there are surrender charges for withdrawing funds in the early stages of this contract (through Year 5), investors should consider this to be a longer-term financial endeavor.
- The contract also offers the opportunity of a death benefit for a named beneficiary (minus any fees or withdrawals), so it can provide a way for an investor to leave a legacy to his or her heirs.
Where it works worst:
- If an investor is not planning to use the income benefit, then this may not be an ideal product, and other, more suitable alternatives should probably be reviewed.
- Also, because of the index component of this annuity, the maximum opportunity for market growth can be cut short due to the cap. Therefore, in exceptionally high growth periods, the investor may not be able to realize their full potential return.
In analyzing any type of financial vehicle, it is important for investors to determine what their overall goals are. In some cases, for example, a product may appear to offer the “best of both worlds,” such as the opportunity for growth, along with protection of principal. Yet, in doing so, it is essential to also have a good understanding of just exactly what it is that you are giving up in order to get those benefits.
In the case of the AXA Structured Capital Strategies annuity, there are many good features, such as the wide variety of segment types to choose from, and the fact that investors can opt for going with either just one or several indices and maturity options.
Also, due to its segment buffer, investors will be protected from market risk – but only up to a certain amount such as -10%, -20%, or -30%. After that, the investor will absorb the loss that is in excess of their segment buffer. This means that a significant amount of loss could still occur.
With this in mind, the only way to truly know if this particular annuity will be a good fit for you is to have it tested. We offer this for free – so just contact me and I will use the calculator from the video in order to provide you with a better illustration of what this annuity could return for you.
Have Questions on the AXA Structured Capital Strategies Annuity? See any Mistakes?
If you have any additional questions regarding the AXA Structured Capital Strategies annuity, or if you see any information that doesn’t look quite right, please contact us.
Over the past several years, annuities have become much more popular – primarily due to their guaranteed lifetime income features. Because of that, a lot of financial advisors have been pushing their clients to purchase them – regardless of whether or not they make good sense for the client. But annuities can also be confusing, and you need to know exactly what it is that you are buying. After all, this is your retirement savings that you are investing here, so you don’t want to make quick financial decisions that you will later regret. These are long-term financial endeavors that are difficult to get out of once you’ve gotten in. If an annuity doesn’t make sense, you need to know now. If an annuity does make sense, however, it can be an essential component of your overall financial picture.
There may be others whom you know that could also benefit from an annuity. If so, please share this post with them. There are lots of people who are getting conflicting information about these retirement products. Our goal is to provide information about annuities in an objective manner. If you have a Facebook account, you can just simply click on the “Facebook” icon and share this article so that more people can find it, and hopefully, will benefit from it.
If you do happen to see anything in this review that may be outdated or out of place, please contact us and let us know. Financial products like annuities can often change – so it can be difficult to keep up with all of the information that is available. We are always happy to make any corrections as they are needed, as well as to add any information that may be required in order to clarify a topic to make it less confusing and more enjoyable for readers.
If you’re wondering if this annuity is right for you, or if you have questions and need a little help getting pointed in the right direction; just reach out via our secure contact form here.
The Annuity Gator