Just say no to annuities, one-third of RIAs say: Survey

Nearly a third of registered investment advisers said they wouldn't recommend annuities, even if clients asked about them, according to a survey released Tuesday from RetireOne and Jackson National Life Insurance Co..

Advisers who are reluctant to recommend the products point to concerns about costs, liquidity and complexity, the report noted.

“Given the uncertainty around COVID-19, the ‘coronacrash’ of spring '20, and the economic climate, we hear from advisors that more and more clients are expressing interest in annuity protections for their portfolios,” the groups wrote in the report.

The fact that more than two-thirds of RIAs said they are open to recommending annuities to clients who are interested is progress for the insurance industry, which has struggled to make inroads with advisers.

Nearly a quarter of advisers surveyed said they would most likely recommend annuities that provide some upside based on an index’s performance but have full downside protection, according to the survey. Another 20% said they would recommend products “with a guaranteed fixed rate of return,” and 15% said they would point customers toward products with full index participation and limited downside protection.

"While these results are encouraging, there is still an opportunity to educate a large portion of these financial professionals about next-gen annuities designed for RIAs and how they can help reduce the cost and complexity," Jackson National Life Distributors retirement solutions president Scott Romine said in an announcement of the survey results.

A recent report from Cerulli Associates found that some advisers who have ruled out annuities in the past are reconsidering. Amid this year’s wild market volatility, investors have been worried about protecting their assets, in some cases inquiring about any products that guarantee principal or future income.

Less than half of advisers (45%) said they talk about retirement income planning during initial meetings with clients, the RetireOne and Jackson survey found. More than a quarter said they do not discuss defined-contribution plan rollover or drawdown strategies until clients are within five years of retiring, the report noted.

That, RetireOne CEO David Stone said in the announcement, can be risky.

“Financial professionals who wait until clients are within that 10-year retirement window to discuss income strategies may miss out,” Stone said. “Utilizing lifetime income solutions at the right time can maximize opportunities to bridge the fragile decade, when their clients face one of the more serious headwinds to retirement security: sequence-of-returns risk.”

The survey was conducted in May and June among 101 financial professionals identifying as RIAs, hybrids or dually registered advisers, according to the report.