A 2021 study from TIAA, a financial services company, found that 70% of workers said they would choose to work for, or stay with, a company that offers access to a guaranteed lifetime income plan. The security of knowing that a monthly check will always arrive has tremendous value to individuals and couples approaching and already in retirement. So much so that people might keep working if they have access to an annuity through an employer. 

Meeting People’s Needs

That same survey by TIAA revealed that just 39% of workers believe Social Security will meet all their financial needs in retirement. There’s clearly a gap between the total expenses people expect during their retirement versus the guaranteed income they have coming. Moreover, Fidelity’s 21st annual Retiree Health Care Cost Estimate report determined that the average retired couple will spend $315,000 over the course of their golden years – that is significantly higher than what people think they will spend on health-related items in retirement, according to Fidelity.

A Sobering Reality

It turns out that not only do people want guaranteed lifetime income, but they also don’t even realize how much money they might need in retirement. Financial advisors must work with their clients to outline realistic retirement income and expense assumptions. Funding potentially decades of life after reaching typical retirement age requires multiple income sources: investments, Social Security benefits, and annuities all must be used properly. Fiduciary financial planners have been wary of making annuities a key part of their value proposition as they don’t want to be seen as product pushers, but today’s financial environment is changing. People desire to own guaranteed-income solutions.

Asking The Question

So, advisors, do your clients own annuities? Have you even asked them? Many households with whom you work probably have an annuity mixed in with their stock and bond portfolios. More broadly, 48% of investors indeed own a guaranteed income product, according to a 2017 survey by Jackson National Life. Uncovering those assets can boost an advisor’s AUM. While almost half of retirement portfolios hold an annuity, that leaves a large chunk of the investing community without such a product. This is a valuable opportunity for today’s RIAs.

Annuity Sales Surging

Fiduciary wealth managers might be skeptical about offering annuities to all their clients. After all, these products might not make sense for everyone. While that might be true, today’s annuities can be tailored to each investor’s objectives with transparent fees. And the market itself is booming with annuity purchases up significantly in 2021. According to the retirement news outlet 401k Specialist, total fixed annuity sales rose 7% to $129.2 billion last year. Across all annuity types, volume jumped 16% from 2020.

Annuities & an RIA

Another concern might be the challenge of managing the annuity product under the RIA umbrella. Advisors should see this as an opportunity, not a concern. AUM can grow by simply transitioning existing outside client annuity assets to the care of an RIA. Halo Investing helps make that possible through our Outsourced Insurance Desk (OID). Giving clients fee-based annuity solutions is now easier and more efficient than ever through Halo’s technology, team of subject-matter experts, and time-saving OID. Advisors do not have to go through the cumbersome processes of acquiring state insurance licenses and tackling huge stacks of paperwork.

Partnering With Halo

Halo’s award-winning digital platform and new OID can provide RIAs the infrastructure needed to effectively incorporate and manage annuities all while fulfilling their fiduciary duties. Our people and technology offer guided case design, annuity recommendations, and product comparison reports. We find that the annuity purchase process through Halo reduces application time by 90% for the advisor. Advisors leveraging Halo’s OID have another channel through which to grow AUM. Given the intense emerging interest in guaranteed income sources among today’s investors, annuities promise to be a bright spot for RIAs’ future growth potential.

The Time Is Right For Annuities

Today’s economic landscape is ripe for annuity sales growth, too. Rising interest rates and the reality of a higher cost of living are major hurdles for traditional investment strategies. They simply have a lower chance of meeting the needs of retirees. Annuities should have a place for these risk-conscious investors. 

Annuities can also be used for people approaching retirement. Bridging the gap between late-career and when Social Security checks begin is an ideal time to consider the benefits of an income stream provided by several annuity types.

Conclusion

In short, your AUM can grow simply by engaging in conversations with clients about what they own outside of your purview. Nearly half of investors own annuities while many fee-based RIAs shy away from these products due to regulations and compensation structures. As a result, assets are left on the table. 

Halo Investing now makes it easy and fast to transition annuities under the RIA umbrella. That means more revenue to the advisor and better service for the client. Halo’s OID handles all the tedious tasks and operational processes so that you as the advisor can focus on what you do best – managing client relationships and building your business.

Please see our Halo Disclaimer for other important disclosures.