Nearly half of investors find guaranteed income investments appealing but many advisors don't recommend them, according to a report published today by NFP Advisor Services Group.
Commissioned by NFP and produced by independent research firm Aite Group, the study assesses independent financial advisors' current position on guaranteed income as its own unique asset class and details their present and potential uses of the product. Officials say the study employed a 360-degree approach, including perspectives from investors, independent advisors and leading insurance carrier executives. It explores the gap between consumer need and advisor use.
In 2010, an estimated 48% of all U.S. households indicated an interest in products that provide guaranteed income for life, the report says, and investors are willing to accept a low rate of return for such protection.
Consumer survey respondents indicated that they were willing to pay between 4 percent and 6 percent of assets to guarantee they wouldn't run out of money in retirement. Yet financial advisors affiliated with an independent registered investment advisor only recommend guarantees 49% of the time and financial advisors affiliated with an independent broker-dealer only recommend them 69% of the time when clients are facing longevity risks.
In addition, research indicated that income guarantees have delivered higher returns and reduced shortfall income risk levels while addressing sequence of return, investment and longevity risk factors for clients.
Aite Group's independent study The Missed Opportunity: Guaranteed Income as an Asset Class, used perspectives from investors, independent advisors and insurance carrier senior executives. Academics and industry thought-leaders were also consulted. The analysis also used publicly available information.
NFP Advisor Services Group is a business segment of NFP that serves independent financial advisors whose clients include high-net-worth individuals and companies. National Financial Partners Corp. and its benefits, insurance and wealth management businesses provide advisory and brokerage services to companies and high-net-worth individuals, partnering with them to preserve their assets and prosper over the long term.
Aite Group is a Boston-based independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.