We’re hearing and reading a lot these days about the annuity market and how 2011 sales were a big improvement over 2010. We’re also hearing a lot about how annuities seem almost perfectly designed for today’s economic environment, especially in a society full of people who are living longer and growing concerned about outliving their savings.
In this roundtable, we look beyond the statistics and talk to the top producers who are generating those numbers.
To get the producer’s perspective on today’s annuity trends and how to capitalize on them, we turned to the following panel of top producers for their viewpoints: Ryan Pinney, Alan Schuh and Kirk Wilkerson.
Ryan Pinney serves as the vice president of brokerage sales for Pinney Insurance Center, a national brokerage general agency that provides insurance, investment and financial planning advice combined with proprietary tools to assist agents and financial advisors. Ryan is a three-time MDRT Top of the Table qualifier. He currently serves as the local president of NAIFA Northern California, as a member of the MDRT Member Communications Committee and as a member of NAIFA California’s Social Media Task Force.
Alan Schuh of Alan Schuh & Associates LLC, in Weston, Fla., has been helping individuals and business owners preserve their assets, increase their income and reduce income taxes for more than 23 years. As host of Safe Money Radio, he helps people protect their retirement money. His firm’s mission is to teach clients safe-money strategies, with a focus on IRA/401(k) rollovers, retirement/income planning and capital transfer strategies.
Kirk Wilkerson of Forest City, N.C., is a registered representative and investment advisor representative who offers securities and investment advisory services through AXA Advisors LLC. Kirk is a nine-year Million Dollar Round Table member with six Court of the Table and one Top of the Table distinctions. His practice is dedicated to helping individuals and businesses build their financial futures.
2012 looks good
Charles K. Hirsch, CLU: Many experts are predicting that, once the sales are totaled, 2011 will have been a very solid year for annuities. In your view, what do you expect 2012 to hold for annuity sales, and why?
Ryan Pinney: I expect to see more of the same and think three factors will have a major impact in 2012. The first is a continuing trend of market volatility—here at home, as well as with the uncertainty in Europe and parts of Asia—causing many investors to remain bearish. The second is the political uncertainty faced in an election year and because of party infighting over important issues like reducing the debt, tax reform, Medicare and Social Security reform, and jobs creation. The third is an aging boomer population that is becoming more risk averse as they approach retirement and their demand for safety and guarantees increases.
Alan Schuh: I expect 2012 to be as good as, if not better than, 2011. Boomers have seen their savings decline or go sideways since 1998. Most realize they don’t have enough saved for retirement, and they are looking for a steady income that somewhat mirrors what their parents received from pensions, which they don’t have access to, for the most part. Annuities with lifetime income riders should become one of the top vehicles for the “decumulation” phase of retirement for all but the wealthiest Americans.
Kirk Wilkerson: I think annuities will continue to resonate for many people and sales will continue to grow. Products available today offer optional benefits not available in the past. In addition to traditional variable annuities with living benefit riders, newer VA products can also help protect against market volatility and interest rate risk. And while interest rates everywhere are low, it seems fixed annuity rates continue to be a viable alternative.
Where VAs work best
Hirsch: Final variable annuity sales figures for 2011 are projected to be up significantly over 2010. Are variable annuities a significant part of your own sales portfolio? If so, what are the best opportunities for these products and why? If you don’t sell variable annuities, why not?
Schuh: I don’t sell variable annuities because I don’t have a securities license.
Wilkerson: Depending on the clients’ needs, we will include variable annuities as options to consider when planning for retirement. Products today offer such flexible choices in how a client wants to structure their contract. We are able to help the client tailor their account to fit their needs and desires. That degree of control has not always been available in our industry.
Pinney: While I don’t use or recommend VAs regularly, I think we will continue to see an increase in their sales over the next few years as investors become more comfortable with or accepting of current market conditions. However, I think the sales of VAs will continue to lag behind the indexed annuity marketplace, which has soared over the same time period that VAs have faltered. The main reason for this shift in the market seems to stem from a desire for reduced costs structure over those associated with VAs, as well as increased safety provided by income riders and living benefits, like long-term care options associated with a fixed or indexed product. When asked, many of our clients would prefer a product that doesn’t decrease in value with market losses, even if they have to sacrifice some of the potential gains the market may offer. In addition, these same clients don’t believe the current market and interest-rate environment can offset the 2 percent to 4 percent annual cost of a VA with similar income guarantees. I tend to agree. The one bright spot I see for VAs is with younger clients who have a much longer investment horizon and expect to need substantial cash accumulation and growth over the coming decades to offset increased cost of living and long-term care needs.
Next week, the panelists discuss indexed annuities and why guarantees are such strong selling points for annuities.