As the coming wave of baby-boom retirees approaches, financial advisors and the people who create annuities are working together more than ever to prepare for the onslaught with new products.
“The need for advice will be a great bull market, with the greatest demand ever seen,” predicted Bill Dwyer (left), LPL Financial’s president of national sales and marketing, at a National Retirement Planning Week breakfast in New York on Tuesday. “We’re looking at product innovation and consumer education.”
Consumers have good reason to clamor for advice. According to the Employee Benefits Research Institute (EBRI), half of workers in a recent survey cited low confidence in having enough money to live comfortably throughout their retirement years. In addition, while 68% of workers said they are saving money for retirement, 46% have less than $10,000 in savings and investments. But according to the Insured Retirement Institute (IRI), which sponsored the breakfast, nine out of 10 boomers who own annuities have a higher confidence in the financial stability of their retirement.
While advisors and insurers continue to collaborate on annuities, there’s one thing they know now for sure about risk management, product development, pricing and the client-advisor relationship: it’s complicated.
In February, for example, independent broker-dealer LPL announced the launch of a fee-based variable annuity (FBVA) platform that offers products provided by insurers Allianz Life, AXA Equitable, Lincoln National, Prudential Annuities and Sun Life.
“Through the new platform, LPL Financial advisors will be able to manage their variable annuity assets within a fee-based relationship and on a discretionary basis, thereby allowing them to deliver active portfolio management efficiently alongside the valued protection features that these products offer,” according to an LPL news release. “Investors will also benefit from a more streamlined pricing structure given the removal of bundled commissions and still maintain the consistency of the fee-based relationship with the financial advisor across products within the same account.”
At the breakfast, Bryan Pinsky, Prudential Annuities’ senior vice president of product development, said that when manufacturing annuity products, his company tries to balance the needs of investors and their advisors against those of shareholders.
“From a product standpoint, we try not to add too much complexity so the advisor can explain it to clients,” Pinsky said.
Steve Kluever, The Hartford’s vice president of annuity product and marketing, added that distributors such as LPL are essential in explaining the pros and cons of various annuity products to investors. “If a financial advisor doesn’t see the value, he won’t bring it to his clients,” Kluever said.
Education is key, said Steve Manley, a Janney Montgomery Scott wealth manager who spoke at the breakfast. He estimated that 25% to 30% of his assets are in the annuities space, a figure that has increased over the last five to seven years. A small percentage of those annuities assets are in immediate or fixed annuities, while the bulk of them are variable annuities.
“Clients frequently ask me, ‘Is this the piece of my portfolio that will guarantee my income for life?’ ” Manley said. “Our clients are asking for more and more of our time, and as financial advisors, we are in the unenviable position of bringing our clients all these products in a clear and concise way that meets their needs. They do require more education.”
National Retirement Planning Week is held annually by the IRI and sponsored by the National Retirement Planning Coalition, a group of financial industry, education and advocacy organizations that work to raise public awareness of the need for retirement planning. The week runs from April 11 to 15.
Read more about National Retirement Planning Week at AdvisorOne.com.