New Research Shows Investor Perception Of Annuities Strongly Influences Purchases, Keeping Annuities From Being Seen As Useful Retirement Planning Vehicles

Thursday, September 13, 2012 08:15
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New Research Shows Investor Perception Of Annuities Strongly Influences Purchases, Keeping Annuities From Being Seen As Useful Retirement Planning Vehicles

Tags: client education | annuities | retirement planning

Annuities are still being shunned by investors despite the fact that they are, in general, becoming more widely accepted as a retirement tool of choice.
 
One reason for the avoidance might be the feeling of 49% of investors that annuity providers will not be able to meet the guaranteed obligations annuity programs are making.

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A study recently released by the Insured Retirement Institute (IRI) and Cogent Research also showed that only 5% of respondents were knowledgeable about annuities. The study showed that when investors view annuities as insurance, they perceive as guaranteed spending capability.
 
When they view annuities as an investment vehicle, they apply risk and return parameters in evaluating them.
 
The view as an investment vehicle is much less favorable. Only 21% of investors will buy an annuity if they perceive it as an investment vehicle; 72% will buy one when they take the insurance/consumption view.
 
Advisors should use online programs that calculate withdrawal rates to show how much investors would need in the future to support their spending habits during retirement.
 
They can also show the tax-deferral advantages of annuities.
 
Advisors can also become more active in preventing the elimination of the tax benefits of annuities by Congress. Tax incentives encourage investors to save. Annuities can also encourage a long-term view of investing, helping clients to not pay as much attention to short-term market volatility.
 
The study also showed that 29% of investors did not invest in annuities because the media has presented a negative view of the products. This certainly has been true about the fees annuities have charged in the past.
 
Doing good due diligence on annuity products can help advisors select the companies that are higher quality, giving investors a more accurate picture of the percieved risks of annuities when viewed as an investment.
 
Advisors can also boost annuity sales by educating clients on their benefits and by talking positively to media representatives.

Comments (1)

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brentb843
I often wonder if the use of an annuity negates the benefit of an advisor? For retirement, the insurance company's investment management personnel take the investor cash and invests it in a manner to achieve the 'withdrawal' guarantee. Why can't advisors have the same level of expertise, saving the investor much of the insurance costs?

Maybe because the insurance regulator looks at the annuity companies books and allocations to determine if the goal is being met, while the brokerage firm looks at AUM and production?
brentb843 , September 17, 2012

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