LIMRA: Advisors View Annuities As Appropriate For Clients’ Plans
WINDSOR, Conn, June 25, 2012—Fifty-five percent of advisors whose clients typically have less than $500,000 investable assets believe annuity products should be included as part of their financial portfolios, according to a recent LIMRA study.
“Our study found that the majority of advisors feel longevity — outliving their assets — to be the greatest risk facing their clients,” said Matthew Drinkwater, associate managing director, LIMRA’s retirement research. “This is particularly true for less affluent households, who often must rely on their personal savings to generate retirement income and do not have enough assets to self-insure against longevity risk. Advisors consider protecting against longevity risk one of their most valuable services, and recognize annuities provide a guaranteed lifetime income stream that will mitigate part or all of this risk for their clients.”
The study revealed that in 2011, more advisors believed the benefits of guaranteed income products outweighed the benefits of non-guaranteed income solutions than did in 2009, 56 percent versus 40 percent. In addition, six in 10 advisors say guaranteed income solutions, like annuities, are well received by their clients. Nearly half of advisors said guaranteed income solutions should be used to cover non-discretionary expenses, up 10 percentage points from 2009. LIMRA attributes advisors’ growing acceptance of guaranteed income solutions in part to product development and better communication about the value proposition by insurers.
The study also found that a large number of advisors feel these guaranteed income products like annuities are suitable for their wealthier clients as well. Forty-two percent of advisors who reported that their typical clients had $1 million or more in investable assets said guaranteed income products were most appropriate for clients with investable assets of $1 million or more. It is important to note that these products are mostly likely used in combination with other solutions as supplements within an overall income strategy.
“The past few years of market volatility have demonstrated the importance of guaranteed income in retirement,” noted Alison Salka, LIMRA corporate vice president and director of LIMRA’s retirement research. “As a result, more advisors are integrating guaranteed income solutions, like annuities, into their clients’ financial portfolios. However, advisors say they need training and support from insurers. Companies that engage wholesalers and others to provide these services will be more successful attracting advisors to sell their products.”
LIMRA, a worldwide research, consulting and professional development organization, is the trusted source of industry knowledge, helping more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.