The financial stability of companies providing variable annuities and the guaranteed income options that come with them are the two most important factors for advisors and investors in purchasing the products, according to a new study by Cogent Research.
Although both have slipped in importance since last year, these two factors still outdistance the other features that interest buyers, according to Cogent, a research organization for the financial industry.
Asked to rate the characteristics that are very or extremely important in a variable annuity, 90 percent of respondents said carrier financial stability and 85 percent said the guaranteed income options.
The survey included 312 advisors and 475 investors, with investors split almost evenly between annuity owners and non owners.
The advisors and investors said communication with the annuity carrier was the most important factor in determining the stability of the company. Yet the amount of times the carriers talk to advisors and investors has gone down, says Steven Sixt, senior project manager for Cogent. The percent who discussed annuities in 2011 was 46 percent, down to 40 percent this year.
"As annuity adoption is expected to continue to increase, it is important that providers take additional steps to ensure investors that their retirement income is not in jeopardy," Cogent warns.
At the same time, 92 percent of advisors and investment managers say their firms require annuity suitability training and 94 percent indicate they have completed or intend to complete training in 2012, "a sign that firms are not abandoning their focus on growing their annuity business," Cogent says.
The next factors considered very or extremely important by advisors and investors are sub-account investment options, protection of principal, death benefits and control over investment selection.
Tax deferred growth, wholesaler support, inflation protection and surrender period were the next most important factors this year, with all but surrender period being considered very or extremely important by more than 50 percent of the respondents.
For the most part, each of the factors kept its relative place in the lineup with the importance of death benefits gaining the most, from 58 percent in 2011 to 65 percent this year.
Over the next five years, carrier financial security and guaranteed income options are expected to continue to be the most important features, says Cogent.