In a study of 3,210 adults aged 24 to 74, results showed that only two out of five Americans have protected retirement income in the form of a pension or an annuity. Yet almost half of Americans expected their savings to last their lifetime. There is an issue at hand on a macro level: for individuals, for carriers, for brokers/advisors, for the market, and the U.S. economy: “Annuities may offer a solution to longevity risk and the attendant retirement income crisis.” – Seth D. Harris, former acting secretary of labor in the Obama administration and labor relations scholar at Cornell.
Seth D. Harris is on a mission to re-educate Americans on the benefits of newer and more evolved annuities, or “lifetime income products,” to help solve the growing problem of navigating longevity in retirement.
Insurers need to educate people on what they offer and how their products work within their lifecycle. Most Americans want retirement security and financial protection for themselves and loved ones, but may not realize that annuities can be a good solution for them. This is especially true of millennials. 40% of millennials have started families and have a growing need to plan for their futures yet still hold on to the perceptions of their baby-boomer parents whom may have had a negative experience with an “insurance salesman”.
One promising change in recent years that may assist in changing the perceptions of annuities? Reinstating the role of a ‘fiduciary’. The fiduciary is making a resurgence with the main goal of the industry to regain public trust. “The task (is to) engage the conversation around outcomes: what do clients want, what do they need. Then that conversation between retiree and advisor can shift to figuring out how to get there.”- Harris
Regaining overall public trust in the annuity industry is a process. “Unfortunately, annuities have a less than stellar reputation among advisors and clients alike. The idea of a long-term investment product intended for older clients will inevitably raise eyebrows, and plenty of horror stories about bilked oldsters abound.” This can be a great opportunity to turn things around for this industry: “If you look at the annuities market, since 2013, you see a decline or flattening out at a time when more people are entering retirement.”
Providing a facelift to annuities may raise product awareness- especially to new and improved products, and improve product education. Given the increasing appetite for better returns, and long term guaranteed retirement income, insurers need to do more to educate agents about these attractive product offerings. Carriers need to focus on the features, benefits, and appropriate cases for each product. But most critically, they must focus on how to balance the concerns that agents have and the perceived risk that clients fear. Carriers that can overcome these inhibitors stand to gain the most from the growth in this sector.
In a recent study of 556 life insurance agents, Market Strategies International set out to determine how well products
meet the needs of producers and their clients. They also looked at what is most important in driving business.
As you might expect, term and whole life products are mainstays for life agents. More than 90% of agents surveyed
have sold life policies in the past 12 months, generating an average of 63% of sales revenue. More than four out
of five agents manage fixed annuities for existing clients, and almost two thirds have sold them in the past year.
Two-thirds of agents hold contracts for fixed indexed annuities (FIAs), and 43% are selling new FIA contracts. But,
just four in 10 manage variable annuity (VA) contracts or have sold new VAs over the past year. Policy counts don’t tell the whole story. Variable annuities accounted for 17% of total sales among life agents last year, and 6% of all managed assets, which is slightly ahead of those invested in fixed annuities. The growth of new indexed or variable products has
changed what agents look for from carriers. Agents spend an average of one day a week managing client accounts,
trying to find better returns.
These agents and advisors say that retaining clients is their most important goal, followed closely by gaining clients. Next come concerns over book profitability, technology integration in their agency, and long-term succession planning. Agents say that it’s important to look for the best products to meet their clients’ needs and stay educated on
these products. The emphasis on education and training is most pronounced among newer agents. Even so, 66% of agents with 20 years or more in the business say ongoing product education is extremely important.
Clearly then, carriers need to invest in training and support for these products as they become more important for agents. Improving product education needs to start at the advisor level. Providers need to better understand why brokers are not selling annuities and/or why they are selling them improperly. To win and keep advisors’ business, annuity providers must know how their brand is perceived in the market and track product sales and trends that could impact the bottom line.
It is critical that providers track the attitudes and behaviors of advisors who manage annuities for retail clients. An understanding of the holistic view of the advisor landscape including practice models, product usage, brand perceptions and user experience, for the nation’s top fixed, indexed and variable annuity provider is also key. This information is paramount when providers are making strategic decisions regarding future product development, branding, communication strategies, advisor engagement efforts and more.
To attract advisors providers must:
- Identify growth and loss segments in the advisor marketplace to boost profitability and grow market share
- Benchmark performance against your competitors to improve competitive positioning
- Explore the effectiveness of wholesaler teams to develop optimized distribution strategies
The Lift Factor can help you design an effective outreach and education campaign to reach this important advisor population at a time where selling annuities could really serve them. Contact us to discuss a thoughtful and strategic marketing campaign.