Boomers are increasingly seeking products with guaranteed income benefits. It’s no surprise to independent registered investment advisors (RIAs), but many say annuities – having the potential to provide said benefits – are a tough sell. This may be due, according to new survey findings from Fidelity, to a lack of knowledge or understanding, both among investors and advisors.
Nine in 10 boomer investors with investible assets of at least $100,000 say they are interested in a product that guarantees monthly income for life, while still allowing stock market exposure with the potential for gains. Furthermore, almost all investors (97 percent) say the priority for their advisors should be protecting assets against market volatility.
“Declining pensions, rising health care costs and greater longevity are requiring investors to personally save more for retirement; yet unprecedented market volatility continues to threaten the personal savings individuals have,” said Joan Bloom, executive vice president, Fidelity Investments Life Insurance Company. “This makes it even more important for older Americans to work with their advisors to understand, and consider, all of their retirement income options, including annuities.”
Half of investors claim a general knowledge of annuities, but only one in five could accurately define them. According to Fidelity, only 35 percent of investors claim to be knowledgeable about how annuity guarantees can protect against stock market losses, and just one in three claims to be knowledgeable about the costs and fees associated with annuities. Even fewer investors (20 percent) report being knowledgeable about the ability to exchange one annuity for another, although doing so can present cost savings opportunities for many annuity-holders.
Forty-one percent of investors say they don’t own annuities because, frankly, they don’t know enough about them, and 35 percent say their advisor has never recommended it.
The reason? RIAs say they don’t offer annuities mainly due to investor cost and because they don’t see a fit with client needs, along with tax implications. Eight percent said it was because annuities were outside their area of expertise or they lacked the licensing to sell them.
Overall, 70 percent of advisors agree retirement needs are changing in ways that better fit with annuities.