June 26, 2012

Annuity Benefits Outweigh Other Products, Advisors Say

LIMRA study finds advisors believe guaranteed products are important part of clients’ portfolios

More than half of advisors who work with clients that have less than $500,000 believe annuities are an important part of those clients’ financial plans, according to a LIMRA survey.

Fifty-six percent of advisors surveyed said that in 2011, the benefits of guaranteed income products like annuities outweigh the benefits of products without guarantees, up from 40% in 2009. Furthermore, 60% say their clients are interested in these products.

“Our study found that the majority of advisors feel longevity—outliving their assets—to be the greatest risk facing their clients,” Matthew Drinkwater, associate managing director for LIMRA’s retirement research, said in a statement. “This is particularly true for less affluent households, who often must rely on their personal savings to generate retirement income and do not have enough assets to self-insure against longevity risk.”

Nearly 60% of advisors are “very concerned” that their clients may outlive their assets. Just over a third say they are only slightly concerned about their clients not having enough in retirement.

Half of advisors said they are using guaranteed income products as a way to cover nondiscretionary expenses for their clients in retirement, up 10 points from 2009. LIMRA notes advisors’ apparent acceptance of guaranteed products is likely a result of better product development overall, but also better communication on the part of insurers that offer the products. 

While guaranteed products are a valuable way to protect less affluent clients from running out of money, the survey found advisors also consider them suitable for their wealthy clients. Among advisors whose typical client had at least $1 million in investable assets, 42% said guaranteed income products were “most appropriate” for clients with investable assets of $1 million or more.

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