Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Retirement Planning > Retirement Investing > Annuity Investing

Financial Advisors' Enthusiasm for Annuities Is Growing: Survey

Your article was successfully shared with the contacts you provided.

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.

This is a significant missed opportunity for a vast population of IARs, RetireOne and Protective said

They noted that while 62% of respondents are not insurance-licensed, adding insurance capabilities via an outsourced insurance desk can grow their capabilities, help them reach a broader audience, deliver more complete holistic financial plans that incorporate insurance protections and build a financial moat to thwart potential external influences who may not always have their clients’ best interests in mind.

“Our survey reinforces the need to further educate IARs on solutions that can help them deliver holistic planning experiences to their clients without outsourcing insurance needs,” Jim Wagner, Protective’s chief distribution officer, said in the statement.

Whys of Life Insurance Solutions

RetireOne and Protective offer several reasons why advisors should pay more attention to life insurance solutions for their clients.

For one, today’s versions of advisory annuities are lower in cost because commissions have been stripped out of them, and the insurance protections have been made more valuable. Many are available without surrender penalties, and some are directly billable without affecting the living or death benefits.

RIAs can easily integrate advisory annuities into their practices, and these can be a viable alternative for advisors to consider as they construct client portfolios consistent with their fiduciary responsibilities.

Data integrations with portfolio management and financial planning software solutions empower advisors to present insurance options that meet the needs of the consumer in a holistic fashion.

Another reason advisors should look more closely at life insurance solutions is that with more insurers bringing these solutions to the market, product development is evolving to rapidly meet the needs and expectations of RIAs and their clients.

Liquidity, lower cost, less complexity and transparency are the core benefits of modern advisory solutions built to meet the fiduciary standard of care.

Still another reason to consider life insurance solutions is to destress clients’ portfolios. A lifetime withdrawal benefit can not only aid clients in meeting their financial goals, helping ensure that they do not run out of money in retirement, but also lower their portfolio reliance rate.

Utilizing an annuity, which typically can pay more in guaranteed income than what is generated from other investment options, will lower clients’ reliance on decumulation strategies from their portfolio.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.