Fixed Annuities Can Help Risk-Shy Clients Diversify

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There’s nothing exciting about fixed annuities, which makes them very attractive to certain investors, according to Nationwide Financial, Columbus, Ohio.

The findings of a recent Nationwide survey suggest that the conservative qualities of fixed annuities – an investment vehicle offered by insurance companies – make them an ideal fit for a risk-averse demographic: affluent women.

The 2001 Nationwide Financial Survey polled 500 people younger than 60 with an annual income of more than $150,000. Results indicate that women are less knowledgeable than men about specific financial products, and are less inclined to take substantial financial risk.

So, an advisor whose client is skittish about taking risks might have an easier time creating a balanced portfolio for her if he adds fixed annuities to the mix, says Michelle Benz, vice president and product manager for fixed annuities, Nationwide.

Using the information from the Nationwide survey, advisors can help their clients understand the benefits of a balanced portfolio, Benz says. They should “take into account what the client is comfortable with, encouraging them to balance their portfolio with fixed annuities, which helps the client feel more comfortable taking risks with other money.”

“Fixed annuities can make a lot of sense for wealthy women who’ve maxed out 401(k) contributions,” she says. Fixed annuities include “options that give risk-averse investors peace of mind enabling them to take more risks with other money.”

Among the protection features included in many fixed annuities are tax deferral, guaranteed rates of return, guaranteed return of principal and the ability to create lifetime income for retirement, according to Nationwide.

Advisors of affluent women can use the information in the survey to show their clients that the benefits of fixed annuities are two-fold, Benz says. The inherent safety of the conservative vehicle allows the risk-averse to add less safe and potentially higher-yielding investments to their portfolio. This is important because women generally live longer than men are and therefore need more money, and because they plan less for retirement, Benz adds. It is also important because they are a guaranteed source of lifetime income, she says.

“Advisors really need to help women understand that since they’re likely to live longer than men, a lack of retirement planning can be devastating,” Benz says.

A recent Million Dollar Round Table survey echoes Nationwide’s finding that women lag behind men in terms of securing their financial future.

“In a survey of 1,000 American adults, nearly half of all women do not know how much money they will need for retirement – and 56% said they plan to rely on their husband, inheritance or a stock market windfall to support them during their golden years,” according to information from MDRT, an association of life insurance and financial services sales professionals based in Park Ridge, Ill.

“Although women are worried about their retirement, they are passively relying on sources beyond their control,” says Michelle Hoesly, an MDRT member who specializes in retirement planning. “Even as more women build careers in the business world, young women remain as uninformed about retirement finances as older women.”

The MDRT survey supports Nationwide’s findings that women’s investment style, typically conservative, usually results in a smaller amount to retire with than if they had chosen riskier but potentially higher yielding investments.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 5, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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