Leading researchers in lifetime income think annuities are right for many retirees at risk of running out of income, and they’d like to see more financial advisors get the word out to clients.
Wade Pfau, author of “The Retirement Planning Guidebook” and founder of Retirement Researcher, an educational source for individuals and financial advisors on topics related to retirement income planning, largely attributes the big disconnect to a difference in retirement-income styles.
“Financial advisors who are primarily investment managers are ultimately going to say there’s no need for an annuity — you just build your diversified investment portfolio, the stock market will probably perform adequately and you’ll be fine,’” he says.
Yet “only about a third of the population at large resonates with this idea that all you need is that diversified investment portfolio and you’ll be fine. Two-thirds of the population want protections and commitments to strategies that a pure investment-based approach doesn’t provide,” says Pfau. This data comes from the Retirement Income Style Awareness Profile (RISA™) tool he co-founded.
Of course, many advisors whose fee model is based on a percentage of the assets they manage probably don’t want to see a large chunk of those assets squirreled away for years in annuities outside client portfolios. Yet record-breaking annuity sales are being driven by investors served by independent advisors and broker-dealers.
