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In the world of cutting-edge technology, ChatGBT and AI have been making waves, but these innovations are nothing new. Guess what? I've been using the thing behind Chat EBT for almost a year and a half now. And we've been using AI in our firm for, I don't know, 10, 12, 15 years.
While AI has been around for some time, it wasn't until the advent of publicly available tools like ChatGBT that it became easily accessible to the masses. It's not that it was something really that new, the ability to have an AI that was able to write texts. Yeah, they did a really good job of it. But if you look at your phone, you had autocomplete. You had these little pieces of that built into tools all over the place. It just took somebody to come along and use it in a way that nobody had done before and make it a commercial success.
Up until very recently, the annuity world, the insurance companies had a lock on their ability to create this investment vehicle, but what's happening right now is something that I think is similar to what happened with ChatGBT. Someone came along and used a technology that was already available and made it a commercial success in a new way.
As someone who has worked in the financial industry for many years, I have always believed that insurance is an important tool. For a long time it was one of the few good options for conservative investors looking to protect their downside while still participating in the market's upside.
Annuities Are No Longer The Only Game In Town!
Annuities and other insurance products have been around for decades, and they have served their purpose well. But over the past few years, there has been a shift in the industry. New companies have emerged that are offering similar products, but with access to a broader range of investments, better upside participation, less fees and hassles than what traditional insurance companies could offer. These new players are disrupting the industry and forcing insurance companies to adapt.
In the world of AI, ChatGBT took technology originally developed by Google, packaged it up in an easy-to-use way for everyday people. Overnight, they had a hundred million users, making them the fastest company to reach that milestone in history. The reason for their success is simple – they offered something that people wanted. It was innovative, useful, and cool. And now, other companies are following suit, trying to get a piece of the action.
This competition is good for investors. It means they have more options to choose from and can find a product that best suits their needs.
In the investment world, It also means that insurance companies have to up their game and create better products to compete.
What is an Annuity
At its core, an annuity functions much like a bank CD, with the added benefit of market-based returns. You give the insurance company a certain amount of money, and in return, they promise to grow that amount by a fixed rate or by a percentage of any market gains. But what sets annuities apart is their unique offering of downside protection.
Unlike CDs or exchange traded investments, annuities guarantee that you will not lose your principal. This protection is invaluable for those looking to safeguard their hard-earned money.
How Do Annuities Provide Guarantees
The big question that any investor should have when hearing about a guarantee, is to question the mechanism of the guarantee. Anybody can spout promises, it is the ability to deliver that really carries weight.
Insurance companies deliver on their promise by entering in to massive contracts with investment banks. The insurance company takes ones side, the investment bank takes the other. One bets that the market will go up, the other that it will go down. Buy enough of these contracts and you can effectively creat