Advisers Should Include Guaranteed Income in Income Strategy Discussions

A study by Greenwald & Associates and CANNEX shows those close to retirement highly value guaranteed income to supplement Social Security, and suggests advisers consistently underestimate clients’ interest.

The fifth annual Guaranteed Lifetime Income Study by Greenwald & Associates and CANNEX shows significant differences in perceptions between advisers and clients regarding discussions of retirement income.

Advisers say they discuss income strategies with an average of 79% of their clients, but only 55% of clients report having discussed income strategies with their adviser. Advisers also consistently underestimate client interest in guaranteed lifetime income products, the study suggests.

Two-thirds (67%) of those close to retirement or in its early stages highly value guaranteed income to supplement Social Security. When guaranteed lifetime income (GLI) products are framed as part of a retirement portfolio strategy to supplement Social Security and cover essential expenses, 71% say they think this would be a good strategy for their own retirement.

The research also reveals growing evidence that consumer sentiment appears to fluctuate based on the prevailing market environment, dropping as stocks rise and increasing when the market experiences sharp volatility. In addition, it highlights the top retirement concerns that drive interest in guaranteed income include paying for long-term care, meeting health care needs and not running out of money.

Among the respondents who reported owning a guaranteed lifetime income product, six out of 10 are satisfied, and three-quarters would recommend them. They are less concerned about day-to-day expenses in retirement, report being able to budget more effectively, spend more on discretionary items, and take greater investment risk with their other assets. Product owners are less worried about losing savings during a downturn than those who do not own them (19% vs. 28%).

“It’s clear from the research that clients are most receptive to annuities with guaranteed income when the product is positioned as part of a broader retirement income strategy–the reason why most product owners said they chose them,” says Tamiko Toland, head of annuity research at CANNEX.

“The message around guaranteed income products is getting lost in translation,” adds Toland. “The research should be a wakeup call for advisers. It reveals a disconnect between what advisers think clients want and what clients say they want, but it also highlights opportunities to discuss retirement income strategies and products in ways that will resonate more strongly.”

More information from the study is here.