Annuities Without the Intimidation

One misunderstanding advisors have about how annuities should be used is that some assume they have to annuitize all of a client’s retirement assets rather than just a portion. Instead, Dubitsky said, they should look at retirement holistically and determine the client’s basic lifestyle needs—not just basic expenses like food, clothing and shelter, but what they need to maintain their current lifestyle. By planning for the gap between those basic needs and guaranteed income like pensions or Social Security, advisors can address clients’ discretionary needs and begin planning with products like insurance, mutual funds and other options.

“The reason why you’re able to talk to them about those options is because you’ve guaranteed the basic needs,” Dubitsky said. “You’ve taken the fear factor off the table.” This is important because Dubitsky says one of advisors’ biggest challenges is getting their clients to do anything because they’re “paralyzed with fear,” even if they like the solutions their advisors are proposing.

The worst part of clients’ mistaken belief that not doing anything is better than doing something and making a mistake is that they’re losing time, Dubitsky said.

“Longevity itself is not a risk,” Dubitsky said. “Longevity multiplies all the other risks that you face.”

Dubitsky expects deferred annuity products, what he calls “create your own pension” annuities, to continue to grow in popularity. Guardian has one such product currently in development and expects to launch it before the end of this year. The reason for their success, he says, is that clients are exhausted. “It’s absolutely exhausting to have uncertainty around your financial future after you’ve spent your entire life working.”

In addition to those specific products, guarantees will always be important. Dubitsky also expects a return to simplicity.

“When somebody doesn’t understand something, one of these things are going to happen: They’re not going to be comfortable with it, in which case they might not make the right move, or they’re going to be mis-sold. But if I keep it simple and understandable, and I provide the right training and education, then I have products that people feel comfortable with. I have products that reps feel confident in selling.”

Dubitsky concludes, “The majority of reps out there care about their clients and want to do the right thing. The better I educate them, the better I arm them with the right information and the right solution, the more successful they’ll be.”