Advisers are admitting now more than ever before that insurers’ solvency and financial strength are at the forefront in their minds when they recommend products.
An unscheduled panel of advisers convened at the Managing Retirement Income Conference in Boston yesterday to talk about the role of insurance products at their firms and their confidence in light of the financial crisis.
The event was sponsored by the Institute for International Research in New York.
After the bailout of American International Group Inc. of New York, clients have become wary of where insurers stand in terms of financial strength and solvency — regardless of the fact that
AIG’s insurance units were never in danger of failing.
“They represent the biggest lack of confidence,” said Briggs A. Matsko, a certified financial planner and a Sacramento, Calif.-based investment adviser representative with Lincoln Financial Advisors Corp. of Philadelphia.
Clients have been eying stock prices as a barometer of how a carrier is faring, he added.
“My confidence is shaken a little, and I worry about insolvency and tax rates,” Mr. Matsko added, discussing his forecast for his own practice over the next two years. Clients who are on a plan that’s supposed to span over 30 years now worry about their progress from one quarter to the next, he said.
Russell T. Hill, president and chief executive of Halbert Hargrove of Long Beach, Calif., noted that recent regulatory actions, including the National Association of Insurance Commissioners’ rejection of a proposal that would have granted carriers reserve relief for variable annuities and other products, put living benefits in a new light and proved that guarantees weren’t merely promises made in a vacuum.
“This was the first thing that led me to believe that variable annuity guarantees have substance,” he said.
Advisers also pointed out that their relationships with their wholesalers have become increasingly complicated, partly due to the complexity of the products and the fact that independent firms see so many wholesalers offering such a variety of annuities and riders that they become overwhelmed.
“It’s hard to remember which rider is which,” Mr. Matsko said. “And now there’s the added complexity of, ‘How can I, in my fiduciary capacity, be sure that I’m picking the right products?’”
What advisers really want is an education in implementing the products in their plans, said Mr. Hill, whose firm started out with a securities focus and has begun using insurance products.
“You used to be able to rely on the wholesaler, but not anymore,” he said.
“If you’re going to allocate the products, then you need an overall education.”
