Annuity advisors not offering enough option...
The 3rd Annual Guaranteed Lifetime Income Study has found that, even though most retirees and pre-retirees want a wide variety of retirement strategies presented to them by their financial advisors, they rarely feel these are provided. Consumers also believe that there is a responsibility on the part of financial advisors to guide them towards products offering guaranteed lifetime income. More than 50 percent saw annuity products as an option they would likely consider.
The survey found that only a third of consumers were very familiar with annuities, and even fewer understood that there were annuity products that would guarantee a certain income level for life. It would appear that there is a significant potential annuity sales market, but a “disconnect” exists between what consumers want and what their financial advisors provide. The fact that only 3 in 10 consumers surveyed have discussed guaranteed lifetime-income products with their financial advisors is a sign that potential annuity buyers are not finding the information they need.
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The survey and associated research were jointly produced by Greenwald & Associates, a full-service market research firm based in Washington DC, and CANNEX, a Canadian provider of consumer-market analytics to the financial services industry that is based in Toronto. The survey covered 1,105 consumers from the ages of 55 to 75 with a minimum of $100,000 in investable assets.
It is clear from the survey that consumers planning for retirement would like to consider a wide variety of options. Nine out of ten respondents desired multiple retirement strategies from their financial advisors and 60 percent believe there is a responsibility on the part of finance professionals to lay out guaranteed-income products like annuities to their clients.
Even though annuities are an option many retirees and pre-retirees desire, sales of such products are actually in decline. According to LIMRA, a financial services research organization based in Connecticut, a total of $222 billion worth of individual fixed and variable annuities were sold in 2016, a 6 percent decline from 2015. The low interest rates seen since the onset of the Great Recession have dampened the sale of annuities, as have the cost and complexity of products.
The best-known annuity program in the United States is actually Social Security, which is the foundation for the retirement years of most Americans. Annuities sold by life insurance and retirement companies can be a stable supplement to this universal program.
Among the survey’s other findings:
“The data shows when it comes to their investment portfolios, consumers are focused on risk assets including equities, but at the same time want to ensure that in retirement they will have the income they need to meet their needs,” said Gary Baker, president of Cannex USA, via a press release. “The lack of familiarity about specific products underscores the importance of providing advisors and their clients options to meet both needs.”
According to the research, potential annuity buyers are three times more likely to add such products to their portfolio when financial advisors present them as an option. This indicates that retirement advisors need to rethink their assumptions about what best serves their clients. It would appear that income-generating products simply are not emphasized enough, even though many annuity products are available.
“Americans are comfortable with the idea of working towards a savings goal as they approach retirement,” according to the Greenwald & Associates press release announcing publication of the study. “They are less used to the idea of working towards an income goal once we reach retirement. This makes it difficult to see how guaranteed lifetime income products might fit into one’s strategy for funding retirement.”
The gap between the desires of consumers of financial retirement products and the options presented by professional financial advisors needs to be more closely examined. Overall annuity sales remain flat, even as many consumers understand the value of annuity products as a part of their retirement strategy.