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Filed Under:Annuities, Sales Strategies

Study: Some Independent Advisors Lack Knowledge of Guaranteed Income Solutions

Photo credit: ambro
Photo credit: ambro

Most consumers want retirement products with lifetime income guarantees, but not all independent financial advisors recommend such solutions. That was the finding of a white paper composed by NFP Advisor Services Group, a business segment of National Financial Partners Corp., and the Aite Group.

The two firms surveyed 248 independent financial advisors, splitting them into three categories: those affiliated with an insurance broker-dealer (B/D); advisors affiliated with an independent broker-dealer; and advisors allied with an independent registered investment advisor (RIA). The Aite Group also conducted in-depth interviews with academics, industry experts and executives. The firms represented the top annuity sellers in the industry, according to LIMRA’s first-quarter sales rankings.

Overall, 65% of independent financial advisors recommend guaranteed income solutions to pre-retirees who may face longevity risks. Broken down by the aforementioned categories, the percentages were:

  • Advisors affiliated with an insurance B/D recommended guaranteed income products 80% of the time
  • Advisors affiliated with an independent B/D recommended them 69% of the time.

Those advisors allied with an independent RIA proposed adding a guaranteed income solution to a client’s portfolio 49% of the time.

Meanwhile, previous surveys indicate that most consumers want guaranteed income in retirement and would pay extra for it. The NFP/Aite white paper cites research from Strategic Business Insights that found that 48% of households express an interest in products that provide a guaranteed income stream for life and were willing to accept a lower rate of return for such a benefit.

Further, research from the Insured Retirement Institute and Alliance Bernstein uncovered that consumers would “pay between 4% and 6% of assets to guarantee that they wouldn’t run out of money in retirement.”

A majority of independent advisors‑55%‑view guaranteed income as its own asset class, with 62% of insurance B/D-affiliated advisors sharing that viewpoint, followed by 54% of those allied with a RIA and 52% of advisors affiliated with an independent broker-dealer.

The white paper also points out that academic research suggests guaranteed income offers several benefits, including providing higher returns and mitigating the possibility of outliving one’s money while also addressing sequence of return and other investment risks.

Yet the NFP/Aite report contends there appears to be a disconnect between consumer demand and independent advisors’ willingness to recommend such products to their clients, particularly within the RIA community. More education is needed to make advisors knowledgeable about guaranteed income solutions so they do not miss a business opportunity.

“As these products evolve and as independent advisors evolve with them, the intention is that future client outcomes will not be jeopardized by advisors’ lack of curiosity or education regarding guaranteed income,” the report concludes.

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Nichole Morford

Nichole Morford
Managing Editor

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