Two recent studies discuss the overwhelming growth of annuities as a sought after financial product. LIMRA cited the significant growth in the number of Baby Boomers now doing their research for information about annuities online. While, Cerulli Associates in a recent survey revealed that annuities have become the most requested financial product that clients ask their advisors about. With all of the mixed press, for and against annuities, these are significant upward trends as those near or in retirement move towards the security of annuities seeking growth and income **guarantees.
These studies failed to point out the impact of hybrid annuities — Dick and Eric discuss Why… hybrid annuities are the real “Game Changers”.
**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
Advisors report that clients request annuities more than any other unsolicited product, according to new research from Cerulli Associates.
Annuities ranked sixth in 2011, but interest in the product has increased over the last year, marked by a 15% increase in the number of times clients request annuities from their advisors, according to the report, Annuities and Insurance 2012: Evaluating Growth Capacity, Flows and Product Trends.
“We’ve seen a tremendous year-over-year increase in the number of times financial advisors receive requests from their clients for annuities,” Donnie Ethier, senior analyst at Cerulli, said in a statement.
Of the advisors surveyed, 60.8% of advisors had clients who requested annuities, just above Roth IRAs, which 58.8% of advisors were asked about. [Read More…]
Study Finds Agents and Advisors Still Play a Vital Role in the Purchasing Process.
WINDSOR, Conn., Oct. 10, 2012 — Sixty-one percent of consumers who researched individual insurance or annuity products looked online, a significant increase over the 38 percent of consumers who looked online in 2006.
“With two-thirds of Americans conducting searches online, it is not surprising that the number of people seeking information about life insurance and annuity products online has increased more than 60 percent over the past six years,” said Mary Art, research director, LIMRA technology research. “However, despite the popularity of online sources, more consumers (69 percent) sought information from agents, brokers and advisors, who are often viewed as the most valuable and influential information sources.”
The top three reasons consumers sought information online are:
- Research companies and product offerings
- Seek general product information
- Compare prices
This is true across all age-groups and income levels.
The study found that more consumers value information gathered online in 2012 than did in 2006, although it still lags behind insurance professionals. In 2006, only 18 percent of recent researchers considered Internet sources to be their most valuable sources, significantly less than the 25 percent found in 2012. In contrast, 37 percent of consumers rate insurance professionals as most valuable in 2012, eight percentage points lower than those who did in 2006. It is also important to note that one in six (16 percent) consumers cite workplace sources as most valuable.
“Companies need to understand that one size does not fit all when it comes to educating consumers about products and services,” noted Art. “Using a multi-channel approach will reach a broader audience in the ways they want to collect information and will most likely lead to more sales.” [Read More…]
Annuity Guys Video Transcript:
Eric: Today, we’re going to talk about why hybrid annuities are game-changers in today’s environment.
Dick: They have changed the annuity world.
Eric: That’s right. It’s not just playoff time in the baseball season. It’s the game-changing time here in the annuity world.
Dick: That’s right.
Eric: There’s a couple things that have come up in the news recently, for some reports that have talked about annuities in general, so we should probably start there, in the fact amongst advisors the Number 1 question they’re getting asked now is about annuities. They want to know what’s . . . it’s the most-requested product out there.
Dick: Right. that’s moved up from a year ago, Eric, where it was asked, it was the Number 6 question on the list and now it’s moved up to the Number 1 question. What do you suppose is driving that?
Eric: Our website, probably. Obviously if you’re watching, this you’ve been driven to inquire about annuities.
Dick: You know what, that brings up our other article, which we’ll tie them all together here, is that the consumer now, about 60% of the consumers are going online, investors are looking at annuities and trying to decide how that fits into their portfolio, and they’re relying on the internet for that.
Eric: Right. There’s a lot of numbers we can throw out here: 10,000 people a day are turning age 65. People are retiring, that’s an obvious number. More and more people are retiring, so what do you want? You want safety, security, income.
Dick: Right. You want to get money over to heirs; you want to do it the most efficient way.
Eric: People are concerned. When you look at the problems that Social Security, Medicare, all these government programs are having, they’re looking to other avenues for safety and security. What better than annuity? That’s really what we talk about, with the foundational aspects of annuities being safety, security, and income.
Dick: When you look at this number, you threw a statistic out there, 10,000 a day. Folks, that equates to 78 million Baby-Boomers over the next 15 years. Baby-Boomers are some of the folks that are most comfortable with the internet. The first ones in, not so much. Now as we see this trend begin to change where folks rely on that online information to make their decisions.
Eric: That’s right. They’re turning more and more online to get a little bit of information, and they’re curious about annuities. These two articles didn’t surprise us because, surprisingly or not so surprisingly . . .
Dick: We got our beak both worlds.
Eric: . . . we tend to talk to quite a few people about annuities . . .
Dick: We’ve seen that volume go up, and up, and up.
Eric: That’s right. We can personally say from our own website that started with just our little Central Illinois focus, we now have a national focus.
Dick: It’s just mushroomed out, exactly. Yet there’s really a larger percentage still, about 69% of individuals also want to get their information from someone on a local basis. It’s a mixture of the two that work so well. I think that’s where we come in, Eric, in trying to do both. We run our local practice, so we meet with our clients. We have this national website, which is, folks, it’s loaded with information that you can do your research. Then we’ll actually take that next step and help you get involved with a local advisor.
Eric: All right. Now we’ve said all these things, now what the heck does that have to do with hybrid annuities being game-changers? I can tell you when I talk to people, and I can tell you, out of 100% of the people I’ve talked to today, almost every single one asked me about hybrid annuities and what the potential was for either inflation hedging or deferral. We know that the hybrid annuity has really become a game-changers.
Dick: What will maybe, like you say, a 100% today, and at least 10 to 1, 5 to 1, 10 to 1, when folks call in, they may have an interest in an immediate annuity or a variable annuity#, but it always tends to come back around to the hybrid annuity, which really is the fixed indexed annuity with some of these new income riders. Folks will ask us about that and kind of want us to explain it.
Eric: Really, we always talk about . . . I talk to people about working backwards from your goals to figuring out, one is an annuity a right vehicle, and then how do we meet those goals? A lot of times, we’ll end up looking at those income riders to meet those goals, because I like **guarantees. That’s what those income riders and those . . .
Dick: Contractual **guarantees. If we can live with the **guarantees, anything else is icing on the cake.
Eric: Icing. I like icing. What are the **guarantees that are possible with a hybrid annuity? You have income **guarantees; income for life without giving up your lump sum.
Dick: Right. It’s predictable income that can grow over a period of time.
Eric: You have some annuities in the hybrid world that those income riders can actually produce an increasing income **guarantee, which is unique and innovative. Then the deferral aspect of those income riders; right now, everybody knows interest rates are . . .
Eric: Boo. These unique components the insurance companies are offering on these income riders is as **guaranteed growth rollup for money that can be used for future income.
Dick: Right, while it’s in deferral. That way you have this predictable future income; there’s no surprises. The only surprise could be something that would be better than the minimum. Not likely though with today’s cap rates.
Eric: Right. It’s neat when we find something that’s innovative, that we think is going to outperform, but most of the time, we’re not trying to beat the insurance company. You want the insurance company to be in business as long as you’re going to need . We’re looking for, basically, something that provides both you and the company a **guarantee. They’re going to be both in business.
Dick: The way that the hybrid annuities really have changed the game is a lot of folks, as we would say, your parents’ annuity was an immediate annuity. That immediate annuity carried the stigma of, “I have to give the insurance company all of this money, and if I die, they get to keep it?” That didn’t go over well, as you can imagine.
Eric: It helped them build a lot of big buildings.
Dick: Yet the hybrid annuity comes along and says, “We’re going to work it out so that you can have a the rest of your life, and you can also have your lump sum. If you haven’t used it all, it can just pass on to your heirs.”
Eric: Right. If you don’t’ use it all, we’ll actually give you it back. Whatever you haven’t used, you get it back. Very unique, very innovative, taking the best of the variable world that was very indicative. Now we’ve seen, from a performance standpoint, what’s being offered in what we see people purchasing more often now. We had an article or a blog we did, it’s been about a month ago, the enhanced numbers, what you see the most growth in the annuity world.
Dick: That was the LIMRA Report. Folks you can go back, 3 or 4 blog posts back.
Eric: We’ll put a link out there.
Dick: Another link we’ll put in there. The only area there’s been growth.
Eric: Yeah, it grew, what, 10%?
Dick: Yes. Year-over-year, or [inaudible: 07:27].
Eric: Versus some of the other types of annuities that are actually . . . they’re still being sold, but there just not the growth there.
Dick: Right. Yeah, folks, the hybrid annuities have really had explosive growth and there’s a reason for that. People are cautious and careful about what they do. We live in an information age where folks can go online; they can find the truth out about things. You can fool a few people part of the time, but you can’t fool everybody all of the time. These are legitimate, suitable products if they’re used the right way, and many people are very, very pleased with them.
Eric: That’s right. If you’re looking for safety, security, but yet, not willing to give it all up, consider a hybrid annuity. It’s a game-changer.
Dick: It is a game-changer.
Eric: Thanks for watching today.
Dick: Thank you. Bye now.