Consumers don’t know the difference between variable annuities, equity index annuities and other annuities, said Walter Updegrave during a panel discussion here on how the consumer financial media view annuities.
The panel was held at the marketing conference of the National Association for Variable Annuities, Reston, Va.
As a senior editor of Money, Updegrave writes regularly about retirement issues. He had been asked why annuities get a bad image in the consumer media. Bad sales practices explain some of the negative image, Updegrave said, adding that “everyone blames you” for the bad sales practices of other industry players.
Complexity is another reason. The products need to be simpler, and they need to be understood better, he said. People need to perceive their value, “so they can evaluate the trade-off between what they get and what they give up.”
Janet Levaux, managing editor, Research, San Francisco, said it would help to have a neutral body–like Morningstar or Lipper–push standards forward and assign star rankings of different annuity products.
Robert J. Powell, president of Unison Associates LLC, a Salem, Mass., financial consulting firm, pointed out that reporters must often boil down content to 750 to 1,000 words. “That is very hard to do when the products are so complex, as with the guaranteed minimum income benefits on variable annuities,” he said.
Skepticism also plays a role. Journalists often ask whether someone might be “doing something that is not valuable to my mother,” Powell explained.
What would make things better for journalists who write about annuities? asked Margaret Jensen, media relations consultant for Securian Financial Group Inc., St. Paul., Minn., the panel moderator.
Easier access to people and information, answered Updegrave. In the mutual fund world, there is no problem with this, but not so in the variable annuity world, he continued.
“Also, provide examples of things,” he said. “My impression is there is not much willingness to give details about [product] features.”
Provide a portfolio that includes VAs, suggested Levaux. “What does it look like at age 70? Age 80? Journalists need something to tie on to, some kind of standard. Show what typically makes sense for consumers at certain ages or income levels.”
Education would also help, said Powell. “It might help if a journalist were to spend a day with a manager, for example.”
Additionally, there are a lot of gray areas in products, Powell explained. “The industry needs to acknowledge this and point it out.”
“Why do some journalists love to hate annuities?” asked Jensen.
“It’s hard to say something good about a product that everyone else hates, particularly if you don’t know anything about it,” suggested Updegrave.
“The way we look at it is, people have a problem–for example, retirement income–and they don’t care what product type they will use to solve it. They are not looking for annuities, per se.”
The approach is to see whether annuities should be part of the mix, Updegrave said. “Sometimes they should be, sometimes not.”
Another reason, said Levaux, is that some people “love to hate when something becomes a cause…[and] it’s easier to love to hate than to say, ‘look at how complex these products are.’”
In addition, it is often “easier to write about someone who is older and being taken advantage of, particularly if you don’t understand the product,” Levaux said.
Finally, “annuities become easy to hate when the sales practices you see justify it and horrify you,” added Powell.
All three journalists agreed that articles should provide consumers with advice, not just information. “People come to us because they want advice, not a long treatise on features,” explained Updegrave.
Yes, he said, “the magazine needs to educate. But we also need to say, ‘yes,’ ‘no,’ ‘good thing to do,’ or ‘only in this case.’”
Articles on annuities should build information but also tell when to use the products, at what income levels and for what need, reiterated Levaux.
“My job is not just to educate,” added Powell. “It is also to give my opinion as a columnist, especially if I’ve done the work to support those conclusions.
“If people want education, they can read Encyclopaedia Britannica,” he said.