Income Planning Requires Annuity Know-How

Two in three older advisory clients are seeking help with income planning, but only one-third of financial professionals actively advise about indexed annuities.

A recent survey by Saybrus Partners, which bills itself as an insurance partnership firm serving and supporting the advisory industry, finds a strong majority of financial professionals cite “retirement income distribution planning” as a key goal for pre-retirees.

Yet the same survey finds many advisers are overlooking opportunity in this area, with just 27% frequently recommending fixed-income and/or indexed annuities to clients. Granted, these investing approaches will not be a good fit for all advisory clients at all times, researchers note, but with the prevalence of income planning questions and the likely retirement income shortfall faced by many in the U.S., knowledge of these areas will clearly be a value add.  

The survey found that nearly two-thirds (65%) of financial professionals identified “retirement income distribution planning” as the biggest goal for clients in their 50s and 60s. Given the numbers, financial professionals may not be recommending annuities as often as they should or could for pre-retirees, says Mark Fitzgerald, national sales manager for Saybrus Partners.

Researchers also found that the most frequently recommended products by financial professionals were mutual funds and “advisory services/actively managed funds,” which were both selected by 60% of respondents, followed closely by managed accounts (54%). Variable annuities and life insurance were less commonly the top recommendation, at 35% and 15%, respectively.

The poll was taken during 2015 FPA Annual conference held in Boston in late September, so there is an element of selection bias to the results. When asked what clients in their 50s and 60s consider to be the biggest risk to their retirement portfolios, more than half (58%) said “outliving their savings.” Significantly fewer respondents reported risks such as a major health crisis (17%), market volatility (16%) and taxes (6%).

When asked what products and support they would like to add to their offerings to better address clients’ retirement needs, better education and better technology were both selected by six in 10 respondents. Other products and support they said they were seeking included: “more innovative/comprehensive products” (54%), “multi-solution products” (35%), and “better wholesaling support” (27%).

“The data suggests … there is still a tremendous opportunity for both manufacturers and wholesalers to provide more comprehensive support for financial professionals,” Fitzgerald says.