Experts have long pointed to ongoing skepticism and confusion for participants’ lack of annuity usage, but new research points to an entirely different reason for the disconnect: financial advisors.
A brief by the Center for Retirement Research at Boston College, based on a recent survey, looks at how financial professionals view annuity products and whether their recommendations impact the way clients engage with guaranteed lifetime income tools.
The survey fielded responses from 400 financial professionals with over $30 million in assets under management (AUM), and questioned them about their clients’ longevity, whether they recommend annuities, the types of annuities they are most likely to suggest, and if their clients follow their advice.
The CRR at Boston College found that 76% of financial professionals discuss with their clients the possibility of living until age 95, with 17% believing that more than half of their clients will outlive their savings by then.
On longevity risk, 90% admitted being at least somewhat concerned that their clients will exhaust their retirement savings.
When asked how often they recommend annuity products to participants, two-thirds of respondents said they suggest guaranteed lifetime income products to less than half of their clients. Furthermore, over two-fifths of respondents recommend annuities to less than a quarter of their clients.
The CRR at Boston College notes that the lack of annuity recommendations could simply be due to the fact that most clients won’t follow through on the advice, as without guidance, annuity products have been difficult and complex to acquire in the past.
Yet, the research shows that of the professionals who recommend annuities, 40% say their clients follow through on their counsel— showing the minor influence advisors can have on participants.
In fact, the CRR at Boston College notes that with proper advice and guidance from a financial professional, a “modest” number of clients are more likely to be consider and buy an annuity product.
“…The results from previous analyses suggest that financial professionals have untapped potential in increasing annuity take-up,” writes CRR at Boston College researchers. “Since roughly half of those who can afford to annuitize [those with over $100,000 in financial assets] indicate they would buy an annuity if the process were simple, professionals can play a role in facilitating such transactions to serve both their clients’ needs and their desires.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
