When I retire, in about 40 years or so, I plan to have some type of annuity as a component to my overall investment strategy. In addition to my 401(k), my Roth IRA and my hobby of messing around on E-Trade (which I have to admit I am about as dismal at as I am at my other hobby, golf) I will buttress my portfolio with an annuity.
That will not be the case for many people of my generation as they do not know what an annuity is or how one works. And the few that do have their information muddled and riddled with misconceptions. You may say: Well, that is the job of the financial advisor. It is their responsibility to educate and relay important retirement options to the investor. And you would be correct, but not completely. People in the medical profession are constantly reminding people what is good for them and many never heed the advice. A persuasive campaign is needed to explain to people why they should stop smoking instead of just finger-wagging from a doctor.
When I ask educated professionals of my generation about annuities they automatically equate them with structured settlements that arise from some type of accident. And when J.G. Wentworth, the equivalent of a life settlement for annuities, is the most known name in the industry among a whole generation of the general public, there is an issue that needs to be addressed.
This is not the first time that I have thrashed the industry for being too insular and short-sided. For all of its advancements over the last few years (its enthusiastic embrace of social media, the constantly improving diversity of its workforce and the successful public relations outreach to the general public regarding retirement preparedness), they have glossed over an important fact. Yes, people need to start preparing for retirement earlier, but one of the products that you sell to mitigate against longevity risk and insufficient retirement planning is either unknown or misunderstood to younger generations.
And it is not only Millennials. Many in older generations remain confused and skeptical about what annuity products can do for them; this, at a time in their lives when retirement should be their main financial focus.
Those who are aware of what the products do and how they can work for them in retirement have misconceptions that make closing an annuity sale an arduous task.