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December 31, 2015 at 05:14 AM
Generating enough retirement income continues to be a top concern among investors today, and while annuities can be a helpful solution to achieve that goal, there are a lot of options out there and making the right choice can be confusing. Combine that with the fact that not all annuities are created equal and the variable annuity landscape is always changing, and it just became even more confusing.
In the past, advisors’ perceptions of variable annuities haven’t always been positive. Following the economic crisis in 2008-2009, annuity insurers responded with decreased benefits, increased costs and additional investment restrictions, thereby making variable annuities too expensive and too complex for some advisors to consider.
Then in 2012, the Taxpayer Relief Act started to hit the wallets of investors and, as a result, tax-deferred accumulation became even more important. Advisors found themselves not only looking for investment vehicles to help with tax-deferred accumulation, but also in search of new ways to balance portfolio risk through the use of non-correlated assets in the form of alternatives. But alternatives were not particularly tax efficient, which is why it made sense to use them inside a tax-deferred variable annuity. This type of investment also allows for diversification for non-correlated asset classes which is helpful during volatile markets.
See also: 11 more annuity tax facts you need to know
Advisors are always searching for ways to provide value to existing clients by introducing new investment options, and they are always in pursuit of ways to capture new assets. As the new year dawns, this could be the perfect time to look at your current book of business and reevaluate investments to make sure they are still a good fit. Or perhaps a clients’ situation has changed and now is the time to introduce a new investment option. There is also a lot of money in motion, so advisors may be on the pursuit for ways to capture new assets.
As mentioned, because not all variable annuities are created equal and the landscape is always changing, it can also be difficult to keep up with the different types of investment solutions in the marketplace, the intricacies of how they work and determining which product is right for which client. All of which make it even more challenging to introduce new investment options. But what if there was a simple option that met your client’s needs?
Although not new to the variable annuity landscape, there is a renewed focus on Investment Only Variable Annuities (IOVAs) and they certainly deserve consideration.
