Retirees and pre-retirees overwhelmingly want their financial advisors to present them with a palate of retirement income strategies, but few advisors actually do, a new survey found.
Consumers also believe financial advisors have a responsibility and a duty to present them with financial products that provide guaranteed lifetime income, according to the 3rd Annual Guaranteed Lifetime Income Study of 1,105 retirees and pre-retirees.
“With both the consumers and the advisors, that goes unspoken,” he added.
Nine in 10 respondents said financial advisors should present them with multiple retirement income strategies, the survey found.
In addition, 60 percent of respondents said advisors have a responsibility to present them with products that offer guaranteed income benefits as part of a retirement income strategy.
The joint survey with Cannex, an analytics platform that supports the exchange of pricing information for annuity and bank products, polled retirees and pre-retirees ages 55-75 with more than $100,000 in household assets.
Annuities, which are sold by life insurance and retirement companies, are the only financial product that people cannot outlive.
The industry sold $222 billion worth of individual fixed and variable annuities last year, 6 percent less than 2015, LIMRA Secure Retirement Institute said. Low interest rates have made it more difficult to sell annuities, but cost and complexity were also cited as drawbacks.
Monthly Social Security deposits, on which millions of retirees rely for income are, in fact, the nation’s largest annuity program.
A Question of Positioning
Of the respondents who have an advisor, 68 percent had discussed strategies for drawing income in retirement, the survey found.
But only 28 percent of respondents said their advisor mentioned annuities with guaranteed lifetime income as a strategy, the survey found.
Separate annuity research concluded that consumers tend to view financial advice as information that pertains to where to invest, rather than how to draw down assets during the income phase of the investment cycle.
Discussions with advisors tend to veer in the direction of investment choices, growth rates and returns, metrics more important during the accumulation phase of a retirement portfolio.
Left behind is how to protect income or structure guaranteed income streams more efficiently in the drawdown phase of the portfolio.
“People are being advised, but not being advised about drawing income,” Kincaid said.
So income-generating products tend to get shorter shrift when, in fact, dozens of annuity product types exist in the market.
“The data shows when it comes to their investment portfolios, consumers are focused on risk assets, including equities, but at the same time want to ensure that in retirement they will have the income they need to meet their needs,” said Gary Baker, president of Cannex USA, in a news release.
“The lack of familiarity about specific products underscores the importance of providing advisors and with clients options to meet both needs,” he added.
Consumers often find it difficult to quantify how much a guaranteed income stream for life is worth, Kincaid said.
When asked how much they would be willing to pay to receive $1,000 a month for life, two-thirds of respondents had no clue, the Greenwald research found.
Bridging the Divide
The chasm between the retirement income strategies consumers say they want and the paltry options they say advisors are giving them could be bridged if retirement income discussions are reframed, Greenwald concluded.
When talking about guaranteed lifetime income is positioned to supplement Social Security to cover fixed expenses in retirement, more than 50 percent of respondents see annuities as desirable, the survey found.
Clients are three times more likely to buy an annuity when advisors discuss retirement income strategies with them, the research found.
The survey also uncovered the following:
* 58 percent of respondents said that an annuity was a desirable way to safely increase the amount of income they could take from their investments each year.
* 55 percent said annuities were desirable to cover essential expenses for life in coordination with Social Security benefits and pension income.
* 49 percent said annuities were a desirable way to make sure that supplemental expenses like health care costs and mortgages were covered every year.
Previous Greenwald surveys have picked up on the fact that consumers intuitively grasp the value of annuities and lifetime income, yet overall individual annuity sales remain flat.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
Article Published by InsuranceNewsNet March 9 2017