According to a recent study conducted in the fourth quarter of 2012, the annuity industry is losing affluent investors. Based on findings from the study conducted by Spectrem’s Millionaire Corner, the share of millionaire investors who own fixed annuities fell from 23% at the end of 2010 to 20% at the end of 2012. The share of millionaire clients who own variable annuities also fell in the same time period, from 26% in 2010 down to 22% in 2012. According to the same research, non-millionaires who have between $100k and $1m in investable assets are even less likely to own annuities. During the same time period, those with fixed annuities fell from 31% down to 17% over the past two years and those owning variable annuities fell from 24% to 15% in 2012. It’s interesting research that deserves some attention from the annuity industry.
Why is the changing annuity industry, with products that solve so many retirement concerns, losing affluent clients? Based on research from the AARP, investors have become more reluctant to invest in annuities due to the loss of liquidity and opportunity cost. The majority of the participants surveyed also indicated a lack of information and education on the products prevented them from investing in annuities. As new annuity products are developed with so many different income and LTC features, it’s understandable that they can appear confusing, and as a result, less attractive to clients. Obviously, financial advisors and insurance agents will have to do their part in educating clients in order to turn this trend around in 2013.