IRI/Cogent Study: Retirees Favor Guaranteed Income Over Asset Accumulation

Research from the Insured Retirement Institute (IRI) and Cogent Research underscores the importance annuity buyers place on guaranteed income during retirement as opposed to accumulating assets. Nearly two-thirds (65 percent) of advisors who participated in the survey and who sell annuities said that guaranteed income options are expected to become more prevalent over the next five years, surpassing other factors.

For annuity investors, more than one-third (34 percent) said the main reason for the purchase was guaranteed income, followed by advisor recommendation (27 percent) and tax-deferred growth (23 percent). Meanwhile, 68% of advisors reported that they have received at least one client request for an annuity in the past 12 months.

However, despite the popularity of annuities‑sales of both variable and fixed annuities hit a record high of $2.2 billion in 2010, a 10 percent jump from the previous year‑advisors say they encounter some hurdles in selling the product. For example:

  • While nearly eight in 10 advisors said they are extremely familiar with annuities in general, just four in 10 indicated they are very or extremely familiar with annuity regulatory changes.
  • The majority of advisors agreed it takes more time and effort to sell an annuity in comparison to a mutual fund. Specifically, the annuity purchase process, including paperwork, is more burdensome than for other investments.
  • Roughly nine in 10 annuity producers said that the deeper the understanding of annuities, the more they can sell the products. Yet simplifying the annuity with fewer benefits and riders may not help the sales process. Just 30 percent said the simpler the annuity the more apt they are to sell them. According to the IRI/Cogent report, advisors favor “annuities that can be easily explained and understood by themselves and investors alike. This will enable them to focus their efforts on promoting the benefits and not trying to explain the structure of the product or how it works.”

In addition, many advisors expect rollovers to be a growing source of funding for annuities and that the target market for this product is shifting from retirees and pre-retirees to younger investors.

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