Erich Maria Remarque’s epic novel, All Quiet on the Western Front, a story of young German soldiers caught in the horror of WWI, is considered one of the greatest books ever written. It tells the tale from the German infantry side of fighting a meaningless war and dealing with constant death and destruction.
The epicenter of the story is a short truce that caused the front line to fall silent, if only for a couple of days. The quiet allowed the soldiers to collect their thoughts, share experiences, and wonder about their future.
In many ways, the annuity industry has been caught just like these six young infantrymen, not quite knowing what is to come.
For many years the annuity industry was branded as a poor stepchild by many in financial planning and those on Wall Street. Our product was described as confusing, complicated, and beneficial only to the agent selling the annuity and the company issuing the annuity.
Many “urban” legends were born during this time period, such as if you die, the insurance company will keep your money, or the insurance company will pay lower than market interest rates to take advantage of the unaware consumer. Over time, the industry has been able to pull back the curtain and show an annuity for what it is, a safe and secure product that provides specific benefits to the annuity owner. The trade-off is simple; the annuity company provides benefits that help the annuity owner obtain their desired retirement goals. The annuity company gets to hold the annuity owner’s money — quid pro quo.
Financial planners and Wall Street hate annuities for one simple reason; an annuity stops the movement of money. The money stays in the annuity and severely limits movement. It is money movement the broker and Wall Street needs and loves because money movement means compensation.
The Obama administration began to suggest the benefits an annuity could provide in retirement planning, and slowly annuities moved to respectability. Now with the addition of guaranteed income being added to qualified accounts by the Secure Act, annuities are moving onto center stage. That and the fact that the consuming public loves and wants the benefits annuities provide. Safety, security from market risk, income that cannot be outlived, and a product fully guaranteed by the issuing insurance company, companies highly regulated by 50 state Department of Insurance agencies.
With the growth of the insurance annuity has come more and more demand, demand Wall Street has finally noticed. In fact, their sudden notice of the demand for these products has caused several national brokerage companies to begin to offer the insurance annuity. The public has demanded, and Wall Street has had no other option but to provide them.
Growth of the insurance annuity has been phenomenal with 2019 sales topping $200 billion and 2020 expected growth of 8%.
Yes, things are not quiet on the annuity front; in fact, they are exploding. Exploding with new and stronger insurance annuity products, exploding with better and more diverse benefit riders, exploding with essential and needed guarantees.
Bill Broich is the co-owner of Annuity.com, a website that connects consumers with financial professionals.