Value of Advisors Underscored by Annuity Program Pilot

Early responses to a new direct-to-consumer (D2C) annuity pilot program in Arizona reveal that buyers want to talk to someone – or something – before committing to a long-term retirement investment.

The early findings in Nationwide's Guaranteed Retirement Income program raise new questions for insurance companies serious about expanding through the growing D2C channel to reach middle-income consumers directly online.

“People still want to talk to somebody, whether a family member or a professional,” said Eric Henderson, senior vice president of life insurance and annuities at Nationwide.

“They want to talk to somebody before pulling the trigger,” Henderson said.

During business hours, it’s easy to route people to live advice dispensed by voices at the other end of the line.

But after hours, on weekends or holidays, when many people are more likely to sit down and give retirement investing serious thought, that silence often causes people to abandon the sign-up process or put off the decision.

To keep people on the website, Henderson said Nationwide is looking to test artificial intelligence (AI) chat functionality in which a computer generates the next question from questions that visitors are already asking.

Retailers routinely suggest new products and services based on what the consumer has already bought or based on online browsing patterns.

In the Nationwide pilot program, search marketing techniques in which an ad pops up on Facebook or through online searches draw consumers to the fixed annuity retirement program.

Launched in March, the program has been live for about six months.

D2C Challenges Agent Channels

The D2C channel is considered a key distribution channel through which insurers can attract middle-income consumers, many of whom neither work with a financial advisor nor have access to an employer-sponsored retirement plan.

Because these consumers own fewer assets than the mass affluent and the wealthy, they are less likely to be attractive to financial advisors who need to generate income from fees and/or commissions.

Under new Department of Labor rules governing retirement advice, advisors are expected to shift still further toward wealthier clients as automated algorithms take over asset allocation tasks and simple investment principles for smaller accounts.

By 2018, the fastest growth within the D2C channel is expected to come from direct response TV, online lead generation platforms and online direct sales made completely through the Internet without agent intervention, said consultant Samantha Chow in a report published last year. by Aite Group.

No-Fee Program

Nationwide’s Guaranteed Retirement Income annuity, which doesn’t charge any administrative fees, is available only to Arizona residents between the ages of 35 and 70.

Participants can contribute between $120 and $12,000 a year for 15 years or until the age of 65, whichever is longer.

Closing ratios are still low, but of the people who have signed up so far, many are in their mid-40s and have elected to contribute minimum, maximums and everything in between, Henderson said.

A 37-year-old man contributing $200 a month to age 65 would receive $661.93 a month, a 42-year-old woman contributing $200 a month to age 65 would receive $460.57 a month, a 47-year-old man putting away $200 a month to age 65 would receive $328.90 a month, according to Nationwide’s payout examples.

Nationwide chose Arizona because the state’s middle-market demographics reflect the country’s and the company’s brand presence and awareness.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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