More Annuity Owners Are Buying Their Contracts From Issuers
Many see using the products as a way to provide a death benefit or to pay for long-term care.
For financial planners and life insurance agents, more competition in the annuity sales market may be coming from the insurers writing the annuities.
A research team working for Nationwide Annuity maps annuity shopping paths in a new summary of results from a survey of 300 U.S. planner or advisor clients who own individual annuities.
About 68% of the participants said they bought their annuities from their planners, but 13% bought their contracts directly from the companies that wrote the contracts.
For the survey participants who had bought their annuities since 2019, the direct purchase share was 17%, indicating that insurers’ slice of the sales may be about 31% bigger than it was just a few years ago.
About 20% of the participants with multiple annuities had bought at least one of their contracts from the issuers.
What it means: Life insurers may typically sell their annuities through agents and planners, but they don’t have to.
The survey: Nationwide is a big annuity writer.
The company fielded the survey through an online system in February. All of the participants were ages 50 through 74. None had started receiving income from their annuities.
The survey team used the term “financial planner” to refer both to advisors and planners, but not to financial professionals who described themselves as insurance agents.
The participants did not know that Nationwide had sponsored the survey.
The details: Analysts found that about 18% of the survey participants had bought their annuities from insurance agents.
Many financial professionals object to the idea of clients using annuities as a tool for coping with federal income taxes or providing a death benefit for loved ones. They believe that the main reasons to buy an annuity are to create a long-lasting stream of income and to protect principal.
The annuity owners themselves seemed to have a somewhat different view of the value of annuities.
About 67% listed generating income as one of their top three reasons for buying an annuity, and 48% listed principal protection as a top reason. But more than 25% listed providing a death benefit, paying for long-term care or generating tax-deferred growth as a top reason.
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