Clients ask advisers about annuities more than any other product: Survey

Clients are asking about annuities — and they're doing it without any prompting from their financial advisers. Annuities — sixth in a similar survey last year — soared to the top of the list as the most-asked-about product, supplanting Roth individual retirement accounts, which finished second this time. Section 529 college savings plans, came in third both years, and exchange-traded funds fifth, according to data from Cerulli Associates Inc. Commodities and currency products took fourth place this time, down from second. The research firm worked with the Financial Planning Association, Morningstar Inc. and a handful of other groups to poll 6,500 advisers. With today's 10-year Treasury rates hovering at around 1.6% and with equity markets being relatively volatile, annuities have become a costly proposition for insurance companies, causing many to discontinue rich product benefits. But the demand continues to surge, noted Donnie Ethier, a senior analyst at Cerulli. “It speaks to the Catch-22 of the industry: Guarantees are more difficult to hedge and offer, but these are the only guarantees available,” he said. The prospect of rising taxes also makes investors think about annuities' tax-deferral features. A number of the latest products target fee-based advisers and offer lower costs, tax deferral and investment options, but not the generous living benefits of yesteryear. Companies that are pitching such products include Sammons Retirement Solutions Inc. and Jefferson National Life Insurance Co. Nationwide Financial Services Inc. yesterday moved the distribution of its no-load Income Architect and its marketFlex variable annuities so that advisers offering these products get the same sales support they would for other Nationwide products. Clients with $2 million to $5 million in assets are the targeted audience for these fee-based products, Mr. Ethier said. “These products are getting back to the story of annuities — the tax efficiency of the investment platform,” he said. “Wealthier clients are valuing these new products that are offering alternative strategies.”