What You Need to Know
- The share of advisors who would not recommend an annuity is shrinking, according to a survey by RetireOne and Protective Life.
- Advisors are more likely to recommend CDs than fixed or fixed indexed annuities to clients looking for principal protection.
- A lack of awareness about recent innovation may explain the objections from advisors who are unlikely to recommend an annuity.
RIAs strongly believe that guaranteed lifetime income delivers immense value to their clients and their resistance to annuity solutions appears to be waning, according to a new survey from RetireOne, an independent platform for fee-based insurance solutions, and Protective Life Corp., a wholly owned subsidiary of Dai-ichi Life Holdings.
At the same time, too many investment advisory representatives (IARs) are outsourcing client life insurance needs to an insurance agent or agency, or are ignoring their clients’ insurance needs altogether, the survey found.
The joint survey found that some nine in 10 advisors whose clients own annuities agree or strongly agree that guaranteed lifetime income makes their clients happy and lets them sleep easier.
But despite the growing acceptance of annuities, more respondents recommend certificates of deposit (CDs) than fixed annuities or fixed indexed annuities to their clients in need of principal protection — even though payout rates for fixed annuities over five-year durations could triple the payout of CDs over the same time period.
The survey was conducted between May 11 and June 11 among 198 financial professionals who identified themselves as either an RIA or dually registered, hybrid or turnkey asset management platform or third-party investment advisor.
Change of Mind
In RetireOne’s 2020 survey conducted on this topic, a third of respondents said they would not refer an annuity to clients who expressed interest in life insurance as part of their retirement portfolio.
In this year’s survey, perhaps because of fears brought on by the pandemic, less than a quarter of respondents said they were unlikely or very unlikely to refer an annuity to clients if their needs could be addressed by the features of an annuity.
RetireOne and Protective said a lack of awareness about advisory annuity innovation of the past decade may explain the primary objections from those who are unlikely or very unlikely to refer an annuity. The most-cited complaints were fees, complexity and lack of liquidity.
“Today’s insurance solutions are different from the offerings of years past that were shrouded in commissions and high fees, and we believe that the importance of educating advisors on these new advancements has never been greater,” RetireOne’s co-founder and chief executive David Stone said in a statement.
“Products that are low cost and offer a guaranteed lifetime solution are the way of the future and we are more enthusiastic than ever about enabling fee-only fiduciaries to properly guide their clients into and through retirement they can enjoy.”
IARs’ Missed Opportunity
Half of investment advisory representatives who responded to the joint survey said they either outsource client life insurance needs to an insurance agent or agency, or ignore their clients’ insurance needs altogether.