A product that promises a check in the mail for as long as you live sounds pretty appealing, right? I mean, who wouldn’t want money for life? Many of your clients do.
Yet when it comes to insurance products like annuities that can offer guaranteed lifetime income, not all independent advisors are on board. Or so concluded a white paper, “The Missed Opportunity: Guaranteed Income as an Asset Class,” put forth by NFP Advisor Services Group and the Aite Group.
Of the nearly 250 independent financial advisors contacted by the two firms, 65 percent do recommend guaranteed income products to pre-retirees who may face longevity risk. Not a bad ratio, but considering surveys show many consumers want lifetime income and would be willing to pay more for the benefit, shouldn’t that percentage be higher?
The study also found that an advisor’s affiliation had a significant impact on whether or not he or she routinely advised clients to consider guaranteed income products. Not surprisingly, advisors allied with an insurance broker-dealer (B/D) recommended the products 80 percent of the time, while advisors affiliated with an independent RIA endorsed guaranteed income products half as much. In the middle were advisors affiliated with an independent broker-dealer.
Wanting to know more about these seeming incongruities, I spoke with James Poer, president of NFP Advisor Services Group, to get his take on the findings.
The Austin, Texas-based executive said the purpose of the white paper was not to get more independent advisors to recommend guaranteed income products to their clients, but simply to educate them on the products and their application in certain client situations.
“Our intent is not to articulate that it’s not enough, it’s more to change the perception of when, how and why to employ the tool,” he said.
As for the differences between how the products are viewed based on an advisor’s particular affiliation, Poer chalked it up to contrasting philosophies based on their familiarity with the products and how they get paid.