Two thirds of advisors say that a key goal for pre-retirement and retiree clients is income distribution planning—but that doesn’t mean they’re suggesting annuities as a way to achieve that goal.

That’s according to a survey conducted by Saybrus Partners, Inc., which found that while 65 percent of advisors identified “retirement income distribution planning” as the chief objective of clients in their fifties and sixties, only 27 percent said that fixed and/or indexed annuities were something they most frequently recommended for those clients.

Of course, that could be because annuities can come with higher costs than advisors might be comfortable recommending.

In fact, longevity annuities are coming in for some serious attention, not only from the National Institute on Retirement Security, but also from public retirement plan sponsors looking to cut their longevity risk exposure, and to do it at lower cost than via fixed income annuities.

Fixed annuities have two drawbacks—higher cost and greater difficulty in generating a given level of income.

In addition, the new fiduciary rule proposed by the Department of Labor could, according to its critics, hamper advisor recommendations for such products because of fees and commissions.

Advisor survey respondents said that in order to better address their clients’ retirement needs, they would like to see “more innovative/comprehensive products” (54 percent) and “multi-solution products” (35 percent).

But “today’s fixed and indexed annuities, which are continuing to evolve in their features and benefits,” said Mark Fitzgerald, national sales manager for Saybrus Partners, in a statement, will allow advisors to “provide their clients with a full range of options.”

Fitzgerald added that although fixed and indexed annuity sales had grown by 10 percent in broker-dealer and bank channels, those sales “tend to be less benefit-oriented, possibly due to these advisors being less familiar with the more robust features offered with many FIAs available today.”

According to the LIMRA Secure Retirement Institute, 67 percent of broker-dealer sales of FIAs in 2014 elected a guaranteed income rider and just 25 percent of bank sales did.

“Variable annuities” were only the top recommendation of 35 percent of respondents, although 58 percent said clients in their fifties and sixties believed the biggest risk to their retirement portfolios was outliving their savings.

With so many clients worried about or focused on income during retirement, and so few advisors focused on that issue, it’s clear that something needs to change.

Instant Insights /

Advisors could be overlooking strategy for pre-retiree and retiree clients

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