The New Equitable Structured Capital Strategies (SCS) Plus 21
Comes to…(wait for it…) NEW YORK STATE
FOR BROKER-DEALER INTERNAL USE ONLY – NOT FOR USE WITH RETAIL CLIENTS
As all of you know, we here at the home office are very high on buffered variable annuities, and we have been consistently bemoaning the fact the products outside New York are much better than those found in the Empire. We have been promised for the last 2 years or more that the state was going to look at some of the other features found in 49 states and begin the approval process.
At long last, Equitable broke the bottleneck, and their new product launched in New York on Monday. While it didn’t get everything available in the other states (the income rider, for instance) they did get approval on most of their segments, including some things that we have never had before. In addition, they were magically able to raise their caps to equal or exceed those outside New York. I hesitate to say this, but in one or two ways, this product is actually better than what is available outside NY!
Enough words…let’s try to put this into play here. Below are some charts that illustrate the power of this product. I have used the S&P 500 as the segment index, and the current caps (That’s one reason that it is for B/D use only).
I would also remind you of the following:
The largest 6-year point-to-point negative return since 1980 for the S&P is -15.06%; going back another 10 years largest decline is -18.8%.
We are already down 25% this year, and we can use that as a starting point.
ONE YEAR POINT TO POINT: For the one-year segments I have illustrated the 4 things that can occur from point to point:
Market is up a lot – 25%
Market is up a little – 5%
Market is down a little – minus 5%
Market is down a lot – minus 25%
STANDARD SEGMENT – CURRENT CAPS: 23 % FOR 10% BUFFER; 19% FOR 15% BUFFER
S&P %
S&P $
10% BUFFER %
10% BUFFER $
15% BUFFER %
15% BUFFER $
Up 25%
$125,000
Up 23%
$123,000
Up 19%
$119,000
Up 5%
$105,000
Up 5%
$105,000
Up 5%
$105,000
Down 5%
$95,000
Even
$100,000
Even
$100,000
Down 25%
$75,000
Down 15%
$85,000
Down 10%
$90,000
AND NOW FOR SOME REAL FUN!!!
Dual Direction – This one is only available from Equitable…if the S&P is down for the point-to-point between 0% and the buffer (10%), Equitable will not only make the client whole, but will give the client a GAIN equal to the amount of the loss – see the highlighted row below…a loss exceeding the buffer is subject to the usual buffer rules. By the way, and don’t faint, but this is currently available ONLY IN NY!!!
DUAL DIRECTION SEGMENT 20% CAP FOR 10% BUFFER 15% BUFFER NOT AVAILABLE
S&P %
S&P $
10% BUFFER %
10% BUFFER $
15% BUFFER %
15% BUFFER $
Up 25%
$125,000
Up 20%
$120,000
n/a
n/a
Up 5%
$105,000
Up 5%
$105,000
Down 5%
$95,000
UP 5%
$105,000
Down 25%
$75,000
Down 15%
$85,000
For internal use only – NOT FOR RETAIL CLIENT USE
Step Up Segments – if the S&P is flat or positive, the client gets the entire Cap.
STEP UP SEGMENT 16.50% CAP FOR 10% BUFFER 15% BUFFER NOT AVAILABLE
S&P %
S&P $
10% BUFFER %
10% BUFFER $
15% BUFFER %
15% BUFFER $
Up 25%
$125,000
Up 16.50%
$116,500
n/a
n/a
Up 5%
$105,000
Up 16.50%
$116,500
Down 5%
$95,000
Even
$100,000
Down 25%
$75,000
Down 15%
$85,000
The next sets of charts illustrate the alternative of using 6 year segments. These segments measure cumulative return of the index on a point to point basis: When the market is down (like now), these look great!
Let’s look at some historical statistics, based on rolling monthly basis 6 year point-to-point:
If we go back to 1971 the percentage of number of gains is 88%, with an average cumulative return of 68%.
From 1980 to 2020, the percentage of gains was 89.8%, with an average cumulative return of 73.6%
The largest cumulative gain was 236.2% (period ending 3/31/2000)
The largest cumulative loss was -18.8% (period ending 11/30/1978)
The cumulative loss exceeds 15% about 1% of the time, and if we take out the 1970s, it is much less often than that (.2%).
Gains exceeded 200% cumulative less than 2% of the time.
Gains exceeded 150% less than 8% of the time.
Just to confuse you a bit more, the Russell 2000 had zero negative returns exceeding 10%, and had a positive cumulative return 99.5% of the time between 1980 and 2020.
Six year illustration Points (cumulative):
Market up a lot – 150%
Market up a little – 35%
Market down a little – 5%
Market down a lot – 19% (this is the 50 year historical maximum)
SIX YEAR POINT TO POINT UNCAPPED FOR 10% BUFFER, 500% FOR 15% BUFFER, 350% FOR 20% BUFFER
S&P %
S&P $
10% BUFFER %
10% BUFFER $
15% BUFFER %
15% BUFFER $
20% BUFFER %
20% BUFFER $
Up 150%
$250,000
Up 150%
$250,000
Up 150%
$250,000
Up 150%
$250,000
Up 35%
$105,000
Up 35%
$135,000
Up 35%
$135,000
Up 35%
$135,000
Down 5%
$95,000
Even
$100,000
Even
$100,000
Even
$100,000
Down 19%
$81,000
Down 9%
$91,000
Down 4%
$96,000
Even
$100,000
In practical terms, these 6 year numbers are uncapped, with the 20% downside giving more protection than has been required in the last 50 years!
TURNING UP THE HEAT ON THE SIX YEAR ! 6 YEAR POINT TO POINT WITH DUAL DIRECTION!
SIX YEAR POINT TO POINT 350% CAP FOR 10% BUFFER 200% FOR 15% BUFFER 115% CAP FOR 20% BUFFER
S&P %
S&P $
10% BUFFER %
10% BUFFER $
15% BUFFER %
15% BUFFER $
20% BUFFER %
20% BUFFER $
Up 150%
$250,000
Up 150%
$250,000
Up 150%
$250,000
Up 115%
$215,000
Up 35%
$105,000
Up 35%
$135,000
Up 35%
$135,000
Up 35%
$135,000
Down 5%
$95,000
UP 5%
$105,000
UP 5%
$105,000
UP 5%
$105,000
Down 19%
$81,000
Down 9%
$91,000
Down 4%
$96,000
UP 19%
$119,000
For Internal Use only – NOT FOR RETAIL CLIENT USE
Here’s some other fine points and competitive advantages:
Minimum is $25,000; Maximum – $1,500,000 – higher with advance approval. Let’s hope we have to ask!
Maximum issue age is 85.
The client can add to the contract – unlike other company’s products, Equitable will deploy the funds into the indicated segments on the next two week time period. Most companies that allow additions will not deploy the funds until the next contract anniversary.
Equitable will allow the client to lock in a cap before the segment anniversary if the client has “capped out” early. The money would go to the money market fund for a minimum of two weeks, and then the client may re-deploy the funds into a new segment. Why is this good? It locks in gains, protects against a market downturn between reaching the cap and the anniversary, and it lets the client start the clock again, in a sense getting an additional upside cap along with creating a new buffer point. Most companies that have something similar allows the early lock, but require the client to stay in the money market (which has M&E fees, by the way) until the segment (and contract) anniversary.
Commissions are 6% with no trail, 1% with a 1% trail, and one in the middle that isn’t very good. Commissions are reduced after age 80.
Equitable will pay on internal transfers
You can mix and match segments – money does not have to all be in one. If one comes up for renewal (say a one year segment), you may go into any segment you wish upon the maturity of the existing segment.
