In terms of financial products, annuities are old. Actually, depending on one’s perspective, they’re ancient. There’s evidence various forms of the products that eventually became annuities existed during the Egyptian and Roman empires.
In more traditional form, the first fixed annuity was offered in the U.S. in 1759, or 17 years BEFORE the signing of the Declaration of Independence. No denying that’s old and confirmation that annuities could use a refresh. That refresh appears to be arriving and at the right time because the asset class is once again gaining traction among advisors and clients.
In addition to lifetime income, annuities can offer guaranteed interest rates as well tax-deferred growth – the former being pertinent at a time when more Federal Reserve rate hikes appear unlikely. As for tax- deferred growth, that has benefits to a broad swath of clients.
Perhaps not surprisingly, the annuities update is being driven by technology. That’s a plus for advisors and it could signal that the asset class might gain traction with younger, tech-savvy clients.
Annuities Meeting Tech
Technology isn’t a savior of anything. It has plenty of drawbacks, but it also has myriad benefits, including plenty applicable in the world of financial services. Annuities are latching on to that theme.
“Clients often hold assets like traditional insurance products that were bought at different times from different places, making it hard to obtain a true snapshot of a household’s assets,” notes Nationwide. “Despite this, annuity products remain a steadfast part of retirement planning for many clients. Integrating traditional annuity products with cutting-edge technology is creating new opportunities for financial professionals to better serve clients and enhance their retirement planning strategies.”
Advisors should not fear the combination of annuities and tech. After all, chances are advisors are using more technology for everything from back-office tasks to client relationship management and risk assessment. Said another way, practices are increasingly modern and steeped in tech. Annuities shouldn’t be an exception to that trend.
“These technologies enable you to create detailed, customized financial plans that incorporate annuity products, considering the diverse assets that clients have acquired from various sources,” adds Nationwide. “By incorporating annuities into your tech-driven approach, you can offer your clients the best of both worlds: the time-tested benefits of annuities and the efficiency of modern technology.”
Why Annuities/Tech Combo Makes Sense
Advisors are already embracing tech in other areas to enhance practice efficiencies and if ever there was a process in need of streamlining, it’s the annuities application process.
Data confirm that the more advisors leverage, the better their odds are of increasing client retention and satisfaction as well improving overall client engagement. It’s reasonable to surmise that these sentiments extend annuities sales, too.
“One of the most significant advantages of combining annuity products with technology is the potential for improved engagement and education with your clients,” concludes Nationwide. “In general, annuities continue to be popular. According to LIMRA’s U.S. Individual Sales Survey, total annuity sales increased 12% year-over-year to $88.6 billion in the second quarter 2023, driven by record-high registered index-linked annuity (RILA) and fixed indexed annuity (FIA) sales.”
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