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Portfolio > Portfolio Construction

LIMRA: Most Advisors Favor Including Annuities in Clients’ Portfolios

By Warren S. Hersch

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More than half of insurance and financial professional believe that a segment of their clientele should have annuities as part of their investment portfolio, according to a new report.

The study, published by LIMRA, Windsor, Conn., says that 55% of advisors whose clients typically have less than $500,000 in investable assets believe that annuities should be included in their financial portfolios.

“Our study found that the majority of advisors feel longevity—outliving their assets—to be the greatest risk facing their clients,” says Matthew Drinkwater, associate managing director, LIMRA’s retirement research.  “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. 

“Advisors consider protecting against longevity risk one of their most valuable services,” he adds. “And [they] recognize annuities provide a guaranteed lifetime income stream that will mitigate part or all of this risk for their clients.”

The study reveals that in 2011, more advisors believed the benefits of guaranteed income products outweighed the benefits of non-guaranteed income solutions than did in 2009, 56% versus 40%.  In addition, six in 10 advisors say guaranteed income solutions, like annuities, are well received by their clients.

Nearly half of advisors say guaranteed income solutions should be used to cover non-discretionary expenses, up 10% from 2009.  LIMRA attributes advisors’ growing acceptance of guaranteed income solutions in part to product development and better communication about insurers’ value proposition.

The study also finds that a large number of advisors believe guaranteed income products like annuities are also suitable for wealthier clients.  Forty-two percent of advisors who report that their typical clients have $1 million or more in investable assets say guaranteed income products are most appropriate for clients with investable assets of $1 million or more. 

The advisors add that annuities supplement other solutions as part of an income strategy.

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