Consumers are rapidly warming up to annuities and want agents and advisors to talk to them about the products, according to a life lifetime income survey released Wednesday
Over just one year, 20 percent more consumers consider lifetime income a very valuable addition to Social Security, a 12-percentage point increase to 73 percent of respondents this year compared to 61 percent last year, according to the Fourth Annual 2018 Guaranteed Lifetime Income Study. A greater number of consumers are also insisting that advisors explain guaranteed income options and strategies.
This year’s survey from the market research firm Greenwald & Associates and the annuity and bank pricing analytics service CANNEX polled 1,003 pre-retirees and retirees between the ages of 55 and 75 with more than $100,000 in household assets.
Talking about guaranteed lifetime income, or annuities, in the context of what works for each individual client is directly related to the advice they receive, said Doug Kincaid, senior director of Greenwald & Associates.
A volatile February might have contributed to the favorability jump in how guaranteed income products are perceived.
Still, people react well to the value of guaranteed income as confidence in maintaining a lifestyle drops steeply the longer people outlive expected longevity.
“That unknown that people are staring at makes guaranteed lifetime income that much more interesting to them,” Kincaid said.
Only 38 percent of respondents have a high degree of confidence they will be able to maintain their lifestyle throughout retirement if they live five years longer than expected due to affordability of long-term care and Medicare, the survey found.
Fewer still – 31 percent – were confident of maintaining their lifestyles if they live 10 years beyond their expected lifespan, the survey found.
Advisor Duty to Discuss Guaranteed Income
The other major shift revealed a higher percentage of people who said advisors have a duty to explain guaranteed lifetime income strategies.
The survey found that 70 percent of respondents agreed that financial advisors have a responsibility to present financial products that meet retirement needs, a nine-percentage point jump over the previous survey in December 2016.
Even so, only half of respondents working with an advisor said they had a conversation about retirement income strategies, the survey found.
“Although some may argue that annuities get a bad rap – the study shows that the conversation really starts and ends with advisor discussions,” said Gary Baker, president of CANNEX USA.
“Clients clearly value the peace of mind guaranteed income brings, but the study shows annuities are often not part of the planning conversation,” he said.
Advisors, financial institutions and retirement plan providers tend to be the major sources of positive information about annuities, while messages from other sources like the media, websites, celebrities, friends and spouses are decidedly mixed.
Positive feedback about annuities from advisors is a major reason clients own an annuity, Kincaid said.
Objections Lack Specifics
As in the past, consumers reacted with a tinge of nervousness when they hear the word “annuities,” the survey found.
In a new twist this year, researchers asked specifically about an “annuity” immediately after asking about lifetime income.
When researchers mentioned “annuity,” interest in guaranteed income products fell.
That’s a sign that the industry needs to broaden access to annuities and explain what they do and how they work, Baker said.
When asked why people objected to an annuity, respondents came up with no single reason or specific objection.
This suggests people are simply fearful of annuities because they aren’t familiar with them rather than objecting to annuities for specific reasons, Kincaid said.
When asked about their interest in an unnamed guaranteed lifetime income product, 25 percent of respondents were extremely interested, the survey found.
But when asked about an annuity with guaranteed lifetime income, only 15 percent were extremely interested, the survey found.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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