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6 Roadblocks Holding Advisors, Clients Back From Annuities

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What You Need to Know

  • With the decline in company pension plans, clients need to find replacements for guaranteed income.
  • Advisors have different view from the reality of how much clients want annuities as part of their savings.
  • A new metric system is being developed to help advisors compare annuity options for their clients.

In 1975, there were just over 311,000 private retirement plans in the United States. Of those, 103,346 were defined benefit, or pension plans, while 207,748 were defined contribution plans, according to statistics from the Employee Benefits Security Administration of the U.S. Department of Labor.

In 2019, the total number of private company plans was 733,678. Only 46,870 of those were private defined benefit plans, while 686,809 were defined contribution plans.

As these statistics show, the retirement savings outlook has changed. Advisors need to learn how to help clients make up this lost guaranteed income, according to several retirement experts on a recent webinar held by the American College of Financial Services.

The panel discussion examined where and how annuities could fit into defined contribution plans as well as retirement portfolios, and how advisors need to be educated on these products for their clients’ benefit.

Wade Pfau, professor of retirement income at the college, moderated the session that was joined by Tamiko Toland, director of retirement markets for Cannex, which provides data and pricing on annuities and other products, and Michelle Richter, founder and principal of Fiduciary Insurance Services and executive director of the Institutional Retirement Income Council.

Steve Parrish, ACFS adjunct professor who introduced the group, stated that annuity sales were up 12% from 2020 to 2021. But there still is a lack of understanding of the product, he said.

“It’s kind of like life insurance: It’s become very complicated,” Parrish said. “Consumers are worried about losing their benefit If they die young. They’re worried about investing in annuities in an inflationary environment.” Also a problem was “market noise,” that is, “fussing over costs and commissions.”

On that note, Pfau, Toland and Richter had several insights on annuities during the ensuing conversation. Check them out in the gallery above.