As the calendar readies a turn to 2019, there are plenty of trends that favor the business of financial advising.
Here are three big ones:
- Annuities sales are on a serious upswing, and young people are open to the products.
- People who work with an advisor are happy clients and better prepared.
- The need for financial planning and guaranteed income continues to grow.
Of course, the biggest news of 2018 came when a New Orleans appeals court tossed out the Department of Labor fiduciary rule. With a roaring economy and tens of thousands of baby boomers needing retirement planning, the industry thrived in the absence of regulatory burdens.
One product that came back strong is annuities. Fixed indexed annuity sales, in particular, sold big, setting records with a 22 percent jump through the first three quarters of 2018. For the first three quarters of 2018, total annuity sales were $170 billion, which is 11 percent higher than prior year, according to the LIMRA Secure Retirement Institute.
“One of the things we found is of the people who said they like annuities and plan to buy one some day, they are very fond of guaranteed income,” said Jafor Iqbal, assistant vice president, LIMRA SRI. “They think that guaranteed income in retirement is the most important thing you can do.”
In addition, LIMRA research found that consumers most interested in buying an annuity are younger and still working. Even those who said they have not purchased an annuity did not hold negative views, in general.
Forty-two percent of consumers who didn’t purchase were open to the idea of annuities. They said annuities are good products and would consider purchasing in the future. The top reason for not buying annuities for this group was that it wasn’t the right time (44 percent).
Very Satisfied Customers
LIMRA also found that those consumers working with an advisor are very confident and happy. Findings were reported in the fourth-annual Retirement Income Reference Book, culled from surveys of 2,200 consumers aged 50 and above.
Sixty-five percent of those surveyed with a formal retirement plan said they were extremely satisfied with the advisor, compared to less than a third of those without a formal plan. Advisors also have a higher rate of customer satisfaction when they provide their clients with a formal retirement plan.
According to new LIMRA SRI data, 54 percent of those with a formal retirement plan strongly agree that their advisors put client’s interest first, as opposed to only one quarter of those without a plan. Almost one third of those with a plan say they are very confident they’ll be able to live their desired retirement lifestyle; less than ten percent of those without a plan feel the same way.
“What we have found is that while most of the consumers who are even very knowledgeable about investments and products and all the other things in there, they cannot figure out the more complex parts of it,” Iqbal said. “The retirement income planning part requires some expert knowledge to do the things beyond the usual factors that a common investor would be looking at.”
Consumers At The Wheel
As more Americans workers lose access to pensions, the shift to self-directed retirement planning is becoming fully realized. Legislation in Congress carries the potential to further boost that trend.
Two separate proposals, one in the U.S. House and one in the Senate, would broaden the scope of open Multi-Employer Plans by allowing more small businesses to band together to offer a retirement plan. The bill is broadly supported and could pass in some form.
The Insured Retirement Institute’s “State of the Insured Retirement Industry” report concurs with the LIMRA assessment of the industry.
American workers are now more responsible for their own retirement financial well-being as employer-provided pension plans continue to disappear and are replaced by defined contribution plans such as 401(k) where workers contribute a portion of their salary to save for retirement, said IRI President and CEO Cathy Weatherford.
“Americans are still increasingly faced with the responsibility of creating their own retirement security, by saving more, creating solid plans, and utilizing the guaranteed lifetime income and investment protection solutions that only the insured retirement industry can provide,” she said.
“While regulatory challenges and uncertainty may continue, so will consumer need and our industry’s ability to meet that need.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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