PLANADVISER - November/December 2022 - 14
trends
Annuities' Bum Rap
Those who understand the products are more apt to like them
PLAN PARTICIPANTS' tendency to dislike annuities is welldocumented.
Yet,
increasingly, workers who are nearing
retirement appreciate the value of creating stable income
to replace their paycheck. Some industry experts recognize
the paradoxical desire for what annuities could do in a portfolio,
while the same investors voice a disinterest in them.
Alison Salka, senior vice president and director of LIMRA
Research, ascribes some of these attitudes to more than
just the psychology associated with the term " annuity. " The
surveys LIMRA has conducted show a pattern linking a good
comprehension of annuities with a more favorable view, she
says. In one example, 40% of people who are knowledgeable
about the products said they would want to convert retirement
assets into guaranteed lifetime income. This falls to
15% among those who are not knowledgeable, Salka says.
Greg Adams, a consultant at Fiducient Advisors, blames
some of the negative sentiment about annuities on those
that had high costs or fees that were poorly explained.
But annuities can serve a useful role for many investors,
Adams says.
" The way I have looked at it, annuities are kind of like
medication, " he observes. " The right medication for the right
person will do wonders, whereas the wrong medication will
be catastrophic. "
Finding a suitable annuity may require more than
casual research, either from an adviser or someone else
acting in a fiduciary capacity. Trusted experts can help
match investors with an annuity that best meets their
needs, Adams says.
Problems with annuities arise when there are surprises
or misunderstandings in the purchase process. " You buy
an annuity because of the protection, the safety and the
guarantees, " Adams says. " You like the idea until you find
out your all-in fees are over 2% a year, as opposed to an
index fund where you could be paying a few basis points a
year. When individuals are surprised by pricing or product
features after the fact, it can seem like an annuity is a bad
product, but there could actually be a ton of value that the
individual was receiving. "
The Setting Every Community Up for Retirement
Enhancement Act is also likely to usher new annuity options
into the defined contribution space, Adams says. Already,
he is helping plan sponsors establish a prudent process for
selecting income products and making sure that process is
in accordance with the governing bodies and regulations.
The biggest challenge is grasping what the regulatory
bodies will look for to grant the safe harbor to plan sponsors,
Adams says. Some of the questions he is helping to
14 | planadviser.com November-December 2022
Art by Miriam Martincic
http://www.planadviser.com
PLANADVISER - November/December 2022
Table of Contents for the Digital Edition of PLANADVISER - November/December 2022
Built to Last
Cyber Ready
Measure Your Footprint
Determinants of Profitability
Keep a High Profile
Strategic Moves
The Value of a VCOC
Retroactive Compliance Reviews
Sheri Fitts
PLANADVISER - November/December 2022 - Cover1
PLANADVISER - November/December 2022 - Cover2
PLANADVISER - November/December 2022 - 1
PLANADVISER - November/December 2022 - 2
PLANADVISER - November/December 2022 - 3
PLANADVISER - November/December 2022 - 4
PLANADVISER - November/December 2022 - 5
PLANADVISER - November/December 2022 - 6
PLANADVISER - November/December 2022 - 7
PLANADVISER - November/December 2022 - 8
PLANADVISER - November/December 2022 - 9
PLANADVISER - November/December 2022 - 10
PLANADVISER - November/December 2022 - 11
PLANADVISER - November/December 2022 - 12
PLANADVISER - November/December 2022 - 13
PLANADVISER - November/December 2022 - 14
PLANADVISER - November/December 2022 - 15
PLANADVISER - November/December 2022 - Built to Last
PLANADVISER - November/December 2022 - 17
PLANADVISER - November/December 2022 - 18
PLANADVISER - November/December 2022 - 19
PLANADVISER - November/December 2022 - 20
PLANADVISER - November/December 2022 - 21
PLANADVISER - November/December 2022 - Cyber Ready
PLANADVISER - November/December 2022 - 23
PLANADVISER - November/December 2022 - 24
PLANADVISER - November/December 2022 - 25
PLANADVISER - November/December 2022 - Measure Your Footprint
PLANADVISER - November/December 2022 - 27
PLANADVISER - November/December 2022 - 28
PLANADVISER - November/December 2022 - 29
PLANADVISER - November/December 2022 - Determinants of Profitability
PLANADVISER - November/December 2022 - 31
PLANADVISER - November/December 2022 - 32
PLANADVISER - November/December 2022 - 33
PLANADVISER - November/December 2022 - Keep a High Profile
PLANADVISER - November/December 2022 - 35
PLANADVISER - November/December 2022 - Strategic Moves
PLANADVISER - November/December 2022 - 37
PLANADVISER - November/December 2022 - The Value of a VCOC
PLANADVISER - November/December 2022 - Retroactive Compliance Reviews
PLANADVISER - November/December 2022 - Sheri Fitts
PLANADVISER - November/December 2022 - Cover3
PLANADVISER - November/December 2022 - Cover4
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