Here's an alternative to light summer reading: a variable annuity prospectus.
Investors continue to eschew leafing through variable annuity prospectuses, with only 17% of 255 retirees and pre-retirees saying they bothered to take a look, according to a recent poll by the Insured Retirement Institute and Cogent Research LLC. The participants had at least $100,000 in investible assets, including their workplace retirement plans but exclusive of real estate.
IRI unveiled the data at its annual Government, Legal and Regulatory Conference in Washington this morning.
Only 14% of the individuals said that they read the prospectuses “most of the time,” and only 3% said they “always” read through the information. Among those who did read the document, clients seem to be skimming the prospectus, as they say they're reading only 7% to 16% of the actual document.
“We are now seeing a decline in the number of investors who state they actually read the full prospectus,” IRI president Cathy Weatherford said. “Rather than provide consumers with relevant investment information, the sheer length of the full prospectus has created a barrier to investor education.
Indeed, people continue to avoid the variable annuity prospectus, even as they snap up the products. Last year, sales hit $153.7 billion, and during the first quarter of this year, they reached $35.7 billion, according to data from Morningstar Inc.
There are even fewer people who opened up the 150- to 300-page tomes this year, compared with 2011. That year, 22% of the participants said they had read the prospectuses.
Customers fail to use the prospectus as a reference, too. Nine out of 10 people polled said that they rarely or never use the prospectus to answer questions about their variable annuity.
Brevity seems to be the best way to get customers to take more than a mere glance at their prospectuses. Ninety-five percent of the investors said they would prefer a shorter paper summary prospectus if the details are online or available on request.
It might even help sales, as 59% of the participating investors said that having a short summary prospectus would have a positive impact on their decision to consider a variable annuity.