Fixed Annuities Often Misunderstood By Agents & Advisors

Have you ever gone to an advisor to purchase a fixed annuity and found that they don’t sell them?  That is happening all over America and some of the reasons advisors aren’t selling fixed annuities are unfortunate.  In the Insurance News Net article “Why Some Don’t Sell Fixed Annuities,” Linda Koco discussed the reasons some people don’t sell fixed annuities despite their increasing popularity.  Research results from the Insured Retirement Institute, Wink Inc. and LIMRA’s Secure Retirement Institute all show increasing fixed annuity sales during the first half of 2014.  Fixed indexed annuity sales had the largest increase.  Despite these increasing sales, Cogent Research found that most producers and advisors don’t sell fixed annuity products.

Fixed annuity sales increased 7.6% from the first quarter of this year to the second quarter.  The sales of $24.3 billion were an increase of 41.6% from the second quarter of last year.  This was mostly due to increasing fixed indexed annuity sales.  Their $12.9 billion in sales in the second quarter was an increase of 14.8% from the first quarter and 41.5% from the second quarter of last year.  Cogent Research set out to determine why more agents and advisors are not selling fixed annuities.  They found that fixed annuity products are sold by around half of insurance agents and around one-quarter of financial advisors.

The main reason that insurance agents said they are not selling fixed annuities is a lack of knowledge about the products.  That’s a little shocking because fixed annuities are some of the easiest products to understand, even among consumers.  This points to the fact that these insurance agents simply haven’t researched fixed annuities and there is a lack of overall education among the products.  When Cogent dove deeper into their research, they found that the majority of those agents not selling fixed annuities were younger, newer insurance agents.  They are most likely starting their careers focused on life insurance sales before learning about more products.  It’s important for annuity carriers to understand this need for greater education aimed at new insurance agents.

Financial advisors gave a different reason when asked why they do not sell fixed annuities.  Fifty-nine percent of them said that the low interest rates keep them away from fixed annuities because the benefits are lessened.  Traditional thinking says that fixed annuities are best used when interest rates are high.  But the increasing fixed annuity sales figures show that the products are important to consumers even when interest rates are lower.  Risk aversion is increasing among a growing population of Baby Boomers and the security of fixed annuities is drawing them to these products.  Advisors should take note of changing demands in the industry.

They went on to ask agents and advisors more specifically why they don’t sell fixed indexed annuities.  One-third of the agents said that their broker/dealer does not want them to sell the products.  When it comes to advisors, one-third believe that indexed annuities limit the growth potential for their clients.  Some of these broker/dealers and advisors might be misinformed when it comes to fixed and fixed indexed annuities.  While these annuity products are not meant for everyone, there are a plethora of benefits offered by these fixed products that insurance agents and financial advisors should be aware of.  Producers would benefit from increasing the education offered to agents and advisors who might sell fixed annuity products.  If they are made aware of the benefits offered by fixed annuities even when interest rates are low, this could help annuity sellers and consumers alike.

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