Advisors Move Away From Recommending Annuities, FPA Survey Says

WASHINGTON — Fixed annuities are fading as an investment option financial advisors offer their clients, according to a new survey.

The study found that, during the height of the financial crisis, fixed annuities were a priority investment option financial advisors offered their clients.

But financial advisors are suggesting fixed annuities at a lower rate now than they did in 2006, according to the survey.

The 2015 survey was conducted in March by the Financial Planning Association (FPA), the Journal of Financial Planning and the FPA’s Research and Practice Institute.

The report said that exchange-traded funds (ETFs)s have surpassed mutual funds in popularity for the first time since the FPA began surveying financial professionals on their use and recommendations in 2006.

The 2015 Trends in Investing Survey also showed that advisors continue to be moving away from annuities, with 38 percent currently using/recommending variable annuities (VAs). This compares with 41 percent last year, and a high of 58 percent in both 2006 and 2008.

And 28 percent of advisors surveyed said they currently are using or recommending fixed annuities with clients. This is down slightly from 29 percent last year and a high of 49 percent in 2010. According to the survey, in 2006, 58 percent of advisors used or recommended variable annuities as an investment option, and 36 percent used or recommended fixed annuities.

The survey said that only 23 percent used or recommended fixed annuities in 2008, but that percentage soared to 49 percent in 2010. According to the survey, 35 percent of advisors used or recommended fixed annuities in 2012 and 29 percent in 2014.

Advisors use or recommended VAs 58 percent of the time in 2006, the survey found. But that percentage has slipped steadily, from 53 percent in 2010 to the current 38 percent.

Only 40 percent of advisors used or recommended ETFs in 2006, but that percentage has grown steadily to the current 81 percent.

By contrast, in 2006, 85 percent of advisors used or recommended mutual funds. That stayed in the 81 to 88 percent range from 2008 to 2014, but dropped back to 78 percent this year, according to the study.

Another key finding of the study is that an uncertain tax landscape is spurring asset allocation changes.

The study found that a majority of advisors, 64 percent, are re-evaluating the current asset allocation they typically recommend or implement.

More advisors said they are re-evaluating asset allocation strategies because of anticipated or existing changes in income tax legislation and investment tax legislation.

InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].

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InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].