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Perspectives on Annuity Awareness

NAFA Annuity Outlook magazine reached out to industry leaders to ask for their take on where we are and where we need to head to have an impact on the annuity awareness front lines. We posed this question:

What is your view on where we stand on annuity awareness in our country?

Charles R. “Chip” Anderson
Executive Director, NAFA

From where I sit, fixed annuity awareness is much advanced today from where we were five-to-10 years ago and when NAFA started some 20-plus years ago. We have increased overall awareness both with consumers and financial professionals. I’m pleased to see that each year, product training offered to financial professionals continues to advance and be a strong focal point.

There are also sales trends and studies which further support the advancement of fixed annuity awareness, as sales continue to grow and fixed annuity buyers express satisfaction with the products. According “Overall, we see sales and consumer satisfaction show the increasing awareness, interest in and support of the guarantees of fixed annuities.” – Charles R. “Chip” Andersonto LIMRA, in 2015 fixed annuity sales increased seven percent, to $103.7 billion.1 A study of U.S. consumers by LIMRA in 2012 revealed higher consumer satisfaction among fixed annuity buyers, with 83 percent of indexed annuity buyers and 86 percent of traditional fixed annuity buyers stating they were satisfied with their deferred annuity purchase; compared to 75 percent of variable annuity buyers who expressed satisfaction.2

In our ongoing work with regulators, the U.S. Treasury Department, U.S. Department of Labor and some legislators, we find there is still a lack of understanding regarding fixed annuities. In face-to-face conversations with these groups, we continue to see they are not able to distinguish between variable annuities with risk and fixed annuities that provide guarantees. Although NAFA steadfastly pursues our mission of educating regulators, legislators, the media and industry personnel, we continue to experience an uphill battle with those who create the regulations and laws impacting our industry. In addition, journalists in the main stream media still write about risk, high fees and the danger of losing principal – characteristics of variable annuities – but they place this under a general banner for all annuities. This lack of differentiation and accurate information continues to hurt the industry and consumers.

Overall, we see sales and consumer satisfaction show the increasing awareness, interest in and support of the guarantees of fixed annuities. We still continue to have our work cut out for our industry in the regulatory realm.

Paul McGillivray
Director, Attorney Collaborative Network M&O Marketing
NAFA Board Member

Five years ago, the Wall Street Journal’s discontinued monthly magazine, SmartMoney, had a cover of a woman holding a phone with her caption “Good Grief!!! I need an ANNUITY?!?” This reflects a growing perception that annuities are something we are going to need. Baby Boomers now pay more attention to their diet and general health and fitness than when we were younger. We may not like it or admit it, but we know those things are good for us.

Screenshot 2016-06-07 11.10.36We increasingly see annuities in the same light. We need the guaranteed lifetime income of an annuity. We might even know it’s a great way to stretch some of our assets into more income than otherwise. It’s like our own health care; we may not do what we need for better health until we get that call from the doctor. So, we go to our doctor and hear what we have to hear. We’ll probably do what our doctor says we need to do. So, we know annuities are probably good for us and that we probably need them. Maybe it’s time to call a “retirement planning doctor” for help with calculating what we will need for retirement income?

Kevin W. Mechtley, J.D.
Consultant, First Consulting & Administration, Inc.
NAFA Board Member

Trying to explain to someone my occupation as an annuity product and distribution compliance consultant will often be met with the question – “What is an annuity, again?” To that end, I think annuity awareness has a ways to go, especially among those in my generation – the daunted millennials. How is that accomplished? I think some of it will be organic as many in my generation find themselves seeking safer, more reliable retirement savings vehicles. If you are born after 1980, you have known a bursting tech bubble, the Great Recession, student loan debt, and you’ve potentially seen your parents push off retirement longer than they expected. As a result, millennials are, by and large, conservative investors.

It is vital that young agents and advisors learn from their predecessors and mentors the value of annuity products, not just for boomers and Gen X, but for millennial investors seeking safety and longevity. It is equally vital that the message about annuities is provided to younger generations in new and innovative ways, including through the use of social media, leveraging big data, and online marketing. Many boomers are aware of annuities and their benefits. Younger savers have much more to learn.

Harry N. Stout
Managing Director, Insurance Insight Group, LLC
NAFA Board Member

My belief is that the annuity message has not yet gotten through to consumers planning for retirement. However, what has begun to hit home with a small, but growing group of consumers is the reality of retirement income planning. As this reality sinks in, the key consumer benefits of annuity products – tax deferral, guaranteed lifetime income, unlimited contributions, no need for underwriting – surface during the planning process.

With all of the economic dislocations that have occurred in our society as a result of the Great Recession, the focus on retirement planning has taken a back seat for most consumers to the realities of financially surviving on a day-to-day basis. You can see this in the statistics published in retirement studies by the Employee Benefit Research Institute and industry sources such as LIMRA. The vast majority of Americans have little saved for what will be a very long retirement.

Once consumers have some financial wiggle room and begin to understand the need for income to finance their expected longer life expectancies, they begin a search for financial products that will provide guaranteed lifetime incomes. That’s where they begin to discover the benefits and practicalities of annuity products.

Annuity Awareness Month is just one example of an educational effort that can assist those planning for retirement. The growth of this effort can only lead to better-informed consumers who understand the value of annuity products.

Kirby Wood
Senior Vice President and Chief Marketing Officer, American Equity Investment Life Insurance Company
NAFA Board Member

Every year, we see more pre-retirees and retirees recognizing the power of fixed annuity products and the importance of protecting their principal. In 2015, the annuity industry posted its biggest sales to date. In the fourth quarter alone, LIMRA reported total annuity sales increased for the third-consecutive quarter, driven by strong fixed annuity results—totaling $61.4 billion, five percent higher than the prior year.

Fixed annuity products are one of the only retirement vehicles uniquely qualified to offer the principal protection, tax-deferred growth and guaranteed income that today and tomorrow’s retirees want. – Kirby WoodThese products are tailored to the needs and concerns of those nearing or entering retirement. Fixed annuities are especially effective for those five-to-seven years before retirement, when clients want to protect their hard-earned principal from market volatility.

This explains why awareness is still highest amongst individuals in their 60s. For the first quarter of 2015, Winks Inc. reported the average age for fixed indexed annuity buyers was 62. However, that is two years younger than the same quarter of the previous year. Additional studies by the same outlet, report that the beginning age range for retirees decreases annually.

As pre-retirees eye their retirement, the annuity sector is becoming increasingly compelling. Especially since, according to LIMRA, more than half of baby boomers ages 50-59 are interested in turning their assets into guaranteed income during their retirement.

I expect annuity sales and interest to continue to increase as pre-retirees seriously consider the next steps in their retirement strategy.

Fixed annuity products are one of the only retirement vehicles uniquely qualified to offer the principal protection, tax-deferred growth and guaranteed income that today and tomorrow’s retirees want.

1 LIMRA, February 23, 2016: LIMRA, August 2012:

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