Future advisor with briefcase on the road to success
My favorite author, the irascible Harlan Ellison, rebelled against being pigeon-holed as a science fiction writer.
Though his work touched upon traditional "sci-fi" tropes, he felt the term limiting and even demeaning since, through that lens, he was writing about the human condition, frailties and all.
Instead, he preferred the term "speculative fiction."
So, with a nod to Mr. Ellison and a wee bit of whimsy, let's speculate about the future of annuities.
Time Travel
An annuity is like a time-traveling device.
The financial decision to own an annuity today could have a meaningful impact on your ability to retire sometime in the future.
Effectively, a commitment to an annuity with an income rider allows you to have a guaranteed income stream at a specified age.
A qualified longevity annuity contract is a perfect example.
This product category allows someone to deposit qualified funds, defer the required minimum distributions from retirement accounts, and then take income at age 80 or 85.
There are limitations and conditions to consider, but tax-deferred compounding can be put to the policyowner's advantage and provide flexibility in planning, knowing that a backstop of guaranteed income will be available at a later age.
The advice of the appropriate tax expert is always advisable.
Planning for immortality?
Annuities with guaranteed income streams could certainly be part of the story!
And, given recent geopolitical events, who wouldn't want to travel back in time and reposition assets to better prepare them for retirement?
H.G. Wells, where are you?
Cloning
Imagine a world where a specific but crucial population is declining.
This population provides a service that's vital to the security of society.
But those people are disappearing at a rapid pace.
What a dystopian nightmare.
I'm talking, of course, about insurance professionals.
By most measures, the number of licensed insurance professionals is declining.
Research from The Institutes Risk and Insurance Knowledge Group shows that 50% of the current insurance workforce will retire by 2035. Meanwhile, the demand for the services those professionals provide is increasing, thanks to "Peak 65."
Peak 65 refers to the historic, record-breaking surge in U.S. retirees, with more than 11,000 Americans reaching the traditional retirement age of 65 daily from 2024 through 2027.
The aging population is ripe for retirement planning advice.
But the same factors contributing to the Peak 65 surge in the number of U.S. retirees mean that insurance professionals are retiring every day. Most of those insurance professionals aren't being replaced.
Is artificial intelligence an answer?
It's certainly gaining a foothold in insurance company processing and in providing prospecting funnels for the remaining insurance professionals.
But artificial intelligence can't hold an insurance license — at least not yet — and the human perspective is still a necessary catalyst in establishing discussions and executing on the desired results.
The ethical, practical and moral limitations may keep us from cloning insurance professionals, but the industry will have to find more ways to clone their skill sets through technology, recruiting and apprenticeship programs.
Annuities and the Future
A lot of speculative fiction revolves around the things that can go wrong with advancements in technology, from Frankenstein's monster, to Hal 9000, to the Terminator.
But let's think outside the box when it comes to the future world of annuities.
Artificial intelligence is already being used as a prospecting, needs-assessment and product-recommendation tool, and carriers are already integrating AI into business processing, though legacy systems are an obstacle to overcome.
The Insured Retirement Institute is leading the way to a "Digital First for Annuities" and has touted the successful paperless transfers between carriers.
There's more to come on that front.
Let's go a step beyond that.
In product design, an assembly of features and benefits is assembled for mass production.
Offerings have a specific set of benefits with little customization.
Durations are set, bonuses are fixed and liquidity is measured.
Couldn't we 'program' all the pricing considerations that go into annuity product design and allow producers and consumers to create a bespoke annuity?
As an example, suppose a client says, "I want a nine-year duration with a 4% bonus and 5% withdrawals with indexing options of my own choosing."
What if the annuity could anticipate customer needs and deliver benefits aligned with the customer's financial goals?
My annuity, my way.
In a digital-first world, powered by artificial intelligence, speculative fiction may become a future reality.
Paul Garofoli, FLMI, RICP, is a regional vice president of individual annuity sales at The Standard.
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