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3 Things to Ask About Annuities Amid the COVID-19 Pandemic

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COVID-19 and its economic aftershocks have raised important questions for Americans preparing to leave the workforce, and surfaced new concerns about their ability to meet the financial demands of retirement.

Advisors’ working environment has also changed significantly. Many advisors are adapting to new technology, learning how to maintain connections with current clients or building relationships with new clients through a computer screen instead of across the table.

While it may feel like everything about the current environment is different, there are some aspects of retirement planning — like the value of guaranteed income — that remain constant.

Advisors may not have been discussing these solutions as frequently with clients in the midst of a 10-year bull market, but they should expect clients to be more interested in solutions that offer stability now. In fact, new data from New York Life and Morning Consult found that 62% of U.S. adults are more interested in a product with a predetermined payout that does not change regardless of how the market is doing, and 56% say they are more interested in a product that allows them to benefit from stock market growth, while also providing a floor for how much they could lose.

(Related: Clients’ Real Risk Tolerance)

Given that clients may be more likely to want to have conversations about guaranteed income, here are three questions that advisors should ask about annuities in this environment.

1. Can the carrier I work with withstand the financial pressures caused by COVID-19?

The current environment is placing financial stress on a variety of businesses, but insurance companies are facing the unique challenge of providing income and guarantees to policyholders during a time of investment losses and a protracted low interest rate environment. It’s important to consider the financial strength and history of the carrier, given those will be the key factors that influence whether they can keep the guaranteed income promise you are making to your clients. It’s also worth inquiring about their stress-testing practices and whether the insurer has planned for scenarios like the one we are currently facing.

2. Is the value of the guarantee the same as before the pandemic?

In normal circumstances, financial strength ratings can seem like a few letters on a piece of paper, but in these times financial strength is paramount. It is important to remember the guarantees are based upon the claims paying ability of the company issuing it, so guarantees from carriers with strong balance sheets and top credit ratings are more valuable than ever.

The ability to continue to offer a full range of solutions to meet your clients’ needs, in addition to assuring clients of the carrier’s financial strength, will pay dividends (figuratively and potentially literally depending on whether the company offers them) with your clients —and, conversely, if you don’t feel well-positioned to highlight the company’s state of business and long-term financial strength, it may be time to consider other partners.

3. What resources are available to me?

Shifting to a virtual working environment in a business that relies so heavily on face to face interactions is a big change for advisors and clients. In order to be the most effective partner to clients, it’s critical that advisors have tools — beyond products — at their disposal to meet their clients’ needs.

How are the carriers you work with supporting you right now? Are they continuing to offer timely educational resources, opportunities to earn CE credits and insights about meeting client needs and sustaining your business in this environment? Ensuring that your carrier — essentially, your business partner — is committed to your success will make an impact as you and your clients look ahead to the ‘next normal.’

This is a difficult time for many to be thinking about their finances — but it is also a vital time to be planning for the years ahead. This environment may prompt your clients to reevaluate the role of guaranteed income in their portfolios, so it’s critical that you work with a partner that can help you continue to provide peace of mind and confidence that they will weather the volatility.

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Dylan Huang (Credit: New York Life)Dylan Huang is a senior vice president and head of retail annuities at New York Life,