One of the most important roles an advisor takes on is helping clients ensure they have enough income in retirement and by “enough” that means enough as to where material downward adjustments in quality of lifestyle aren't necessary.
Smart clients know that this process starts well in advance of retirement and that advisors can add value at various steps along the way. Prime territory for advisors to help clients solver the retirement income equation is with annuities. AIG equips advisors with the resources and tools necessary to present clients with a complete annuities picture.
As many advisors experience over the course of their careers, some clients enter the annuities conversation with a working knowledge of what these products are. At the very least, some clients have at least heard of annuities. However, many clients are downright confused by annuities.
Moreover, many don't know about the different flavors of annuities – fixed, index and variable. That is to say annuities aren't a one-size-fits-all solution. AIG streamlines the annuities conversation for advisors, providing the resources necessary to convey complex annuities concepts in straight forward fashion.
AIG Adds Eases Annuities Complexity
Advisors shouldn't overlook the value in simplifying the annuities conversation, particularly when it comes to variable annuities.
“Investors often think of annuities as overly complex, high-cost products peddled by aggressive salespeople. In some cases, that reputation is well deserved,” notes Morningstar's Amy Arnott.
AIG offers advisors avenues for not only demystifying variable annuities, but highlighting the value and simplicity of fixed annuities. Fixed annuities are particularly relevant in today's low-yield climate when traditional fixed income instruments just aren't getting the job done for clients.
“Thanks to the long-term decline in interest rates (which affects how much insurance companies can earn on their portfolios), payout rates aren’t as high as they used to be,” adds Arnott. “Based on data from Schwab’s Income Annuity Estimator, a 65-year-old man could currently expect to receive monthly payments of about $481 in exchange for purchasing a $100,000 annuity. That’s down from average payouts of more than $700 in 2001 based on data from the Center for Retirement Research at Boston College.”
Making the Quality Call
Another consideration with annuities is quality – something that more advisors are getting hip to through the lens of equity factor investing.
In the annuities space, quality's applications are remarkably similar and that's important to clients because with annuities, clients are giving up assets for guaranteed future income, meaning the viability of the issuer is of the utmost importance.
“Many people also hesitate to give up assets for an annuity because if the annuity owner dies earlier than expected, the money stays with the insurance company instead of going to heirs,” notes Arnott. “The financial strength of the insurer is another important consideration.”
AIG answer that's bell. At the end of 2020, the company had $586 billion in assets under management and life and retirement insurance reserves of $311 billion.