9 minute read
Annuities: Gaps can lead to opportunities
Research finds a gap between what clients feel about annuities and what financial professionals believe they feel about them.
By Susan Rupe
» Seven in 10 investors who have a 401(k) plan are interested in investing in annuities through their plan. Harris said he believed a significant finding is that 66% of investors are considThe year 2024 is expected to be the year of Peak 65, when more people in the U.S. turn age 65 than ever before, unleashing the greatest surge of ering an annuity and that half of investors believe financial professionals have a responsibility to discuss annuities and how they fit into a portfolio if they meet the client’s needs. All these findings align with previous new retirees in history. research done by the alliance. Less than
“The baby boomers are redefining ev- 15% of consumers who are familiar with erything, and they are annuities have a negredefining retirement,” ative impression of said Jon Rosborough, them. But 55% who vice president of Statler are very familiar with Nagle, at a recent we- annuities have a very binar presented by the favorable impression. National Association One key gap that the for Fixed Annuities research uncovered is and the Alliance for that investors who work Lifetime Income. with a financial pro-
With disappearing fessional tend to worry pensions, the tradition- about their finances, al three-legged stool of but few financial proretirement security has fessionals believe their collapsed, Rosborough clients worry that much. said. This makes an- Nearly half (48%) of innuities a key part of the vestors said they worry new retirement securi- about their finances ty framework needed several times a month or to support baby boom- more often. Only 8% of ers through a poten- financial professionals tially long retirement. said they believe their
The alliance and clients worry about fiCANNEX recently nances that often. released the findings of the Protected “There’s a gap between what clients are Retirement Income and Planning Study feeling and what their financial professionof investors and financial professionals. als believe they are feeling,” Harris said. Those findings found gaps in how inves- The implications of the research, he addtors perceive annuities and in their un- ed, are that financial professionals must derstanding of them. focus on reassuring clients and identifying
“In our analysis, we found there are risk-mitigation strategies. 4.3 million households in America that It’s one thing to plan for retirement, are approaching or are in retirement who but an unforeseen retirement is another need that annuity discussion but are not matter, Harris said. The research showed
getting it. They want you to reach out,” Rosborough said. The research showed that protected income and the benefits of annuities are of great interest to investors, but many investors don’t connect the benefits of annuities to the name “annuities.” What financial professionals must do for annuity prospects, said Mike Harris, education advisor with the alliance, “is link those things up — show them this is what an annuity does.” Harris said research found investors are interested in annuities.
Financial Professionals
Importance of Protection When Working with Clients on Retirement Planning
3% 24% 40% 33%
» Nearly two-thirds of investors expressed an interest in buying an annuity as part of their retirement plan. That interest was even greater among younger investors. » Nearly half of investors believe financial professionals have a responsibility to present guaranteed lifetime income products to their clients.
Three-quarters of financial professionals (73%) believe protection is important in the context of retirement income versus 86% of investors. Investors
Importance of Protection When Thinking About Your Retirement Planning Not at all important 12% 2% Only somewhat 36% important Moderately important
50%
Very important
that nearly all financial professionals (92%) said they discussed the possibility of an unforeseen retirement with their clients, yet 37% of clients said their advisors never discussed that possibility with them.
The opportunity here, Harris said, is for financial professionals to discuss the possibility of an unforeseen retirement with clients and use that discussion to initiate a conversation about retirement income.
The research found that although 86% of investors believe protection is important when planning for retirement income, only 73% of financial professionals found the same to be true, Harris said.
“Investors have only one shot at retirement planning,” he said. “If you don’t do it right, you can’t go back and start it over.”
“You might be confident in doing a plan, but clients are more concerned about making sure their basic expenses in retirement are covered by protected, guaranteed income.”
What clients value and the role their emotions play in decision-making are powerful, Harris said. Market volatility and high inflation rates are driving anxiety, and that anxiety “can be a prison for some clients,” he said.
“Make sure those emotions, worries and uncertainties in terms of funding their future goals are key ingredients to successful income planning conversations with clients,” he added.
The study found that one-third of financial professionals are more likely to recommend an annuity due to rising interest rates, inflation and growing anxiety.
Another gap found in the research is that almost all financial professionals said they have had a good conversation about the changing economic environment with their clients, yet one-quarter of investors disagreed.
“There is a communication disconnect between what you’re saying and what clients are hearing and feeling,” Harris said. “This is not matching up with their feelings and emotions — and emotions motivate them to take action.”
Harris advised financial professionals to try to find the disconnect around the client’s desire for protection. “That’s where you want to embed their emotions so they can feel there is safety and security for them,” he said.
Consumers and financial professionals alike are concerned about inflation reducing retirees’ spending power, the research found, with more than 80% of consumers and more than 90% of financial professionals worried about it.
This concern, Harris said, provides an opportunity for financial professionals to reach out to clients and have a conversation about the changing economic environment and how to increase protection of their retirement income.
“You must address these emotions headon,” Harris said. “You have to meet your clients’ financial needs, but you also must meet their emotional needs.”
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.
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AMERICAN EQUITY
Men press snooze on health care
Many men are not paying enough attention to their personal health care, and they’re particularly tight-lipped about their mental health. Those are among the findings from Aflac’s most recent Men’s Health Survey.
The survey found more than half of men go to the doctor only when they feel sick or have an accident. Fewer than half had a routine wellness visit
in the past 12 months. And at the same time, one in four men admitted they’ve never talked to anybody about their mental health and well-being, despite nearly three-quarters having experienced some type of mental or behavior health concern in the past year alone.
Generation Z and millennial men especially report mental and behavioral health concerns as well as their effect on productivity. As the survey reported, 79% of respondents in these categories report having experienced a mental
health concern within the past year, compared to 57% of Generation X and 68% of baby boomers.
SURVEY FINDS HIGHER SPENDING ON MENTAL HEALTH DISORDERS
Overall spending on mental health services increased, while the percentage of enroll-
ees using outpatient services rose from 12% to 16% among people with employment-based health coverage — reflecting a 32% increase between 2013 to 2020.
That’s the word from the Employee Benefit Research Institute, which found that one in five adults and one in six youth experience mental illness each year.
Among enrollees with a mental health diagnosis, average annual spending on mental health care services increased from $1,987 to $2,380 between 2013 and 2020. It increased 20%, or an average of 3% per year.
In addition, spending on outpatient mental health services increased 37%, while spending on prescription drugs for mental health disorders fell 15%.
AMERICANS GIVE HEALTH CARE SYSTEM FAILING MARK
Public satisfaction with the U.S. health care system is remarkably low, an Associated Press-NORC Center for Public Affairs poll revealed. Fewer than half of Americans said health care in the U.S. is generally handled well. Only 12% say it is handled
extremely or very well.
The poll results were even worse when it comes how prescription drug costs, the quality of care at nursing homes and mental health care are being handled, with only 6% or less saying those health services are done very well in the country.
The poll shows an overwhelming majority of Americans, nearly eight in 10, say they are at least moderately concerned about getting access to quality health care when they need
it. Black and Hispanic adults in particular are resoundingly worried about health care access, with nearly six in 10 saying they are very or extremely concerned about getting good care. Fewer than half of white adults, 44%, expressed the same level of worry.
QUOTABLE
Navigating the American health care system is exceedingly frustrating.
— Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design
MAJORITY OF PREMIUM GOES TO PRESCRIPTIONS, SERVICES
Where does your health insurance premium dollar go? America’s Health Insurance Plans conducted its Health Care Dollar study and found that 82.4 cents of every premium dollar goes to prescription drugs and medical services. That’s an increase from the 81.6 cents in AHIP’s last analysis in 2022.
Of each premium dollar, 22.2 cents were spent on prescriptions, the study found. Nearly 20 cents were spent on outpatient hospital costs, while 19 cents went to inpatient hospital costs.
Doctor visits ate up 11.8 cents of each premium dollar, with 3.3 cents spent on emergency room care and 6.2 cents on other outpatient care. The remaining premium spend saw 3.8 cents go to taxes and fees, 3 cents to other fees and business expenses, 2.1 cents on cost containment, 0.8 cents on quality improvement and 4.2 cents on other administrative expenses. The remaining 3.6 cents? That went to profit.
DID YOU KNOW ?
