Why professional guidance is so important when clients buy annuities

08/14/2024 — In 2024, more Americans than ever are celebrating their 65^th birthdays.¹ As they reach the traditional retirement age, many are looking at their financial future with some degree of trepidation and doubt.

What’s behind this lack of financial confidence? For many soon-to-be retirees, the primary concern is not having a source of steady income that will last throughout retirement. There are different ways you can help solve this need for steady income, including different types of annuities. As part of a holistic financial plan, annuities can be a consistent source of income that helps clients feel more confident about their financial position in retirement.

As a financial professional, you can play a critical role in helping clients understand how they can increase their retirement confidence by including annuities in their retirement income plans. According to a recent Nationwide Annuity survey of 300 consumers who currently own an annuity, an overwhelming number (84%) said they had turned to their financial professional to learn more about the benefits annuities offer.

It makes sense that savers would turn to a trusted financial professional for help with this important decision, especially because there’s low awareness of annuities in the marketplace. Annuities can be great savings vehicles for investors at any age, not just for those nearing retirement.

Counter financial stress with greater confidence

The transition from our working careers to retirement is one of the biggest changes we experience in our lives. So, it’s not surprising that many people feel stressed when thinking about what their financial future will look like after they leave the workforce.

“Will I have enough money to enjoy retirement?” “Will I be able to pay for essential expenses?” “Will my savings last for as long I may need it?” These questions are common among pre-retirees and reflect a growing sense of doubt about their financial futures.

Current financial pressures can compound these feelings of stress and doubt. In a Nationwide Peak Retirement survey, many pre-retirees (age 60-65) cited inflation and cuts to Social Security as their top financial concerns about retirement. Nearly one-third of retirees in that same survey said they are not financially comfortable in retirement.

Many retirees who feel financially stressed are looking to start working again; one in three current retirees are considering returning to the workforce. Among these retirees, the top reason for wanting to rejoin the workforce was fear of running out of money.

The security of regular income from a steady paycheck can be hard to replace with savings alone. Annuities may offer a solution for clients who are stressed about having enough income for their spending needs during retirement or are uncertain about running out of money later in retirement. (Clients should be advised that the income payments offered in an annuity are subject to the claims-paying ability of the issues and that returns on the original annuity investment value is not guaranteed.)

Factors in the annuity purchase process

Our recent survey of annuity owners found that motivations for annuity purchase reflect annuity benefits that are similar to those of a pension. Annuities offer several pension-like features such as steady, reliable income and opportunities to capture growth from investments in the financial markets. These were the most popular motivations among annuity owners when deciding to purchase an annuity.

The majority of annuity owners (68%) bought their annuity through a financial professional, highlighting the important role that guidance from a financial professional plays in a client’s annuity purchase decision. But guidance often goes beyond finalizing the annuity contract; over half of clients (58%) engage with their financial professional at least annually to review their annuity. Another 18% said they discuss their purchase with their financial professional more frequently than once a year.

Our survey also uncovered another business-building opportunity with annuities: Many annuity buyers sought out or started a new relationship with a financial professional specifically to purchase their annuity. In my view, this insight shows there’s growing awareness and interest among investors in general in the benefits annuities bring to their financial plans. Marketing your knowledge and experience with annuities can help attract these buyers to your practice, and potentially establish new client relationships that can contribute to your business growth.

Help build confidence in clients’ retirement income plans

The important role that annuities can play in a retirement income plan presents opportunities for financial professionals to offer clients personalized guidance and appropriate solutions when making an annuity purchase. Building the share of annuity business in your practice can lead to greater client retention and growth of assets under management.

When it comes to annuities, you can rely on Nationwide for expertise that helps you deliver insights and personalize guidance, along with solutions that help you tailor your clients’ financial plans around their needs for consistent income throughout retirement.