Annuities May Be Winning Over Advisors Who Were Fence-Sitters: Survey

What You Need to Know

One sign of change: Advisors are more likely to say they have insurance licenses.
More say they will recommend annuities.
The scoffers are still scoffing.

Advisor apathy toward annuities may be fading, but advisor hostility toward the products still looks strong, according to results of a new survey organized by RetireOne and Midland National.

The percentage of advisors who said they were either likely or very likely to recommend annuities has increased to 64% this year, from 52% in 2021.

The percentage who said they were either not likely or very unlikely to recommend annuities held steady at 22% over that same period.

The percentage with a neutral opinion about annuities plunged to 14%, from 26%.

What It Means

Client phone calls could be changing how some advisors see market volatility.

David Stone, the CEO of RetireOne, a distributor of fee-based insurance and annuity products, said in an email interview that the effect of guarantees on client relationships is clear.

On a day when the market drops 600 points, conversations with a client who has a portfolio with an income floor “are bound to be much easier than for an advisor who hasn’t protected their client’s spending in retirement,” Stone said. “The latter advisor is likely fielding panicked client phone calls trying to convince them to hold the course in equities rather than sell low.”

The Survey

RetireOne has been trying to promote sales of a “contingent deferred annuity,” or product that can convert a client’s own investment portfolio into an insured stream of retirement income.

Midland National, an arm of Sammons Financial, writes the CDA contract that RetireOne is distributing.

The companies conducted a survey in May and received responses from 197 financial advisors. The participants identified themselves as RIAs, dually registered advisors or hybrid advisors.

The companies organized a similar survey last year.

Feelings About Investment Tools

Most of the advisors who participated in this year’s survey said they were happy with the tools they have in their client service toolbox.

About 92% said they agreed or strongly agreed that they have the necessary tools in hand.

Roughly 7% said they disagreed with the idea that they have the right tools, and just 1% — two advisors — said they strongly disagreed.

Feelings About Life Insurance

Advisors might be going through a major change in practice scope.

About 42% of the advisors who participated in the RetireOne and Midland National survey this year said they have the credentials and experience they need to design life insurance arrangements themselves, up from 34% in 2021.

Just 28% of the advisors now refer life insurance business to a “trusted agency,” down from 40% last year.

The percentage who have nothing to do with life insurance is 7% this year. That figure is unchanged.

Feelings About Annuities

Many of the advisors who continue to avoid recommending annuities to clients have strong negative feelings about annuities.

They cited fees, client asset liquidity and perceptions of lack of transparency as their top concerns.

About 33% said they might consider recommending annuities if they could design the products themselves, but 67% said they would not consider recommending annuities, even if they could design the products.

Aging Clients

Stone said one consideration is that more clients are starting to draw on retirement assets.

In the past, a 20% portfolio decline might force a working client to change plans for future decades.

If a client is already taking withdrawals from an unprotected retirement portfolio, an advisor might have to talk to the client about canceling a trip to Tuscany, Stone said.

Rob TeKolste, president of Sammons Independent Annuity Group, who has worked with Stone on the survey, sees buffering retirees and other clients against market risk as a big opportunity for insurers.

“Until recently, market risk seemed largely intangible because we were in the longest bull market in recent memory,” he said. “Now, we’re seeing market risk everywhere, and clients are worried.”