Ask Andrew Lord, founder and president of Essential Planning, LLC, in Portsmouth, N.H., if more of his clients are purchasing annuities with lifetime income riders now and he answers plainly, “I don’t see anybody buying them without them.”
In fact, a few years ago, when he saw the growing demand for guaranteed lifetime withdrawal benefits (GLWBs), Lord renewed his securities license so he could sell variable annuities (VAs) with those add-ons. “Took all the tests again like when I was a kid because I thought it was such an important benefit for my clientele,” he says.
Yet Ferris concedes that annuity producers, like Prudential, are not immune from current capital market conditions. Therefore, carriers are fine-tuning their benefit platforms. For example, Ferris says that prior to 2008, roll-ups were generally in the 6 percent to 8 percent range; today, roll-ups bounce between 4 percent and 5 percent.
“For the sustainability of these solutions over the long-term, I think it’s prudent of our industry” to make those adjustments, Ferris says.
Andrew Lord has two answers to that dilemma. On one hand, each case must be reviewed individually in the context of what the policyholder wants to accomplish. “A lot of that has to do with the performance of the policy, the timing of when they bought it, and the client’s other assets,” Lord says.
Yet, he is also outspoken in his belief that the policyholder may not be the ultimate beneficiary of the proposed modifications. “I believe at the end of the day it has very little to do with enhancing benefits for the client and a lot to do with a carrier trying to jettison a liability,” Lord says.