WealthManagement Magazine

Understanding Annuities

Total variable annuity assets now top the $1 trillion mark, and sales last year exceeded $120 billion. I got these eye-popping statistics from the National Association for Variable Annuities (NAVA) Marketing Conference in February. The variable annuity industry has been successful in gathering assets. But to continue this success, it needs to understand consumer attitudes toward the product. To that

Total variable annuity assets now top the $1 trillion mark, and sales last year exceeded $120 billion. I got these eye-popping statistics from the National Association for Variable Annuities (NAVA) Marketing Conference in February.

The variable annuity industry has been successful in gathering assets. But to continue this success, it needs to understand consumer attitudes toward the product. To that end, NAVA offered a session titled What Do Consumers Think About Variable Annuities?

The presentation was made by Steve DeLano, president of Market Metrics, Matt Greenwald, president of Mathew Greenwald & Associates and Eric Sondergeld, assistant vice president of the research division at LIMRA International. The three offered insights about customer attitudes and attributes gathered via various research projects. Among the findings:

  • Consumers buy variable annuities for a variety of reasons 29% as an easy way to save for retirement, 24% to provide a guaranteed monthly retirement income, 21% as an investment with growth potential and 18% for tax-deferred savings.

  • More than half (53%) buy their first variable annuity before their 50th birthday. Another 28% buy between ages 50 and 59, and 18% buy at 60 or older.

  • Consumers have certain expectations of their investment advisers when it comes to annuities. Less experienced buyers want a longstanding relationship with their reps and a thorough education about the product. More sophisticated investors want their reps to offer a choice of annuities and to have done personalized planning.

Do you, as a broker, understand variable annuities? Do your clients understand the product? Does this product fit in your client's portfolio? What do you know about immediate annuities?

I ask these questions because your clients either have variable annuities or someone who would like to manage their assets wants to sell them one. You should strive to be proficient in annuities because they seem to be growing in popularity. The products are changing as developers address the problems that have impeded widespread acceptance thus far.

If you need education, NAVA offers a wealth of information. Check out its Web site at www.navanet.org or contact Mike DeGeorge at 703/707-8830 in NAVA's Reston, Va., office. The group can help increase your knowledge of variable annuities.

Cordially,

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