Investors Might Like Annuities More If ...
The gist of a recent survey of financial advisors from Sun Life Financial, a purveyor of annuity and other products, was to gauge investor attitudes toward variable annuities. Among the findings, advisors said more clients who could benefit from these retirement income vehicles would partake if they had lower fees, were easier to understand, clients felt very confident about the issuing company, and if both clients and advisors had better education about these products.
That's a lot of obstacles. Advisors surveyed said the need for lower fees was the top reason (43%) why clients balk at buying annuities, followed by the need for more client education and for greater product simplicity (both 38%).
"In the past, the insurance industry have made annuities very technical, have used jargon and have made it very difficult for people to understand annuities," says Barbara Hume, Sun Life's assistant vice president of annuity marketing. "They're not as complicated as they're made out to be."
For its part, Hume says Sun Life has given its sales process a makeover with redesigned marketing materials, charts and client statements--along with an eight-minute video--to demystify the annuity world. "We'd like to put more fun into annuities, which nobody has been able to do yet," Hume says.
Hume sees more consumer-friendly times ahead for the annuity space. "I think we'll see the whole industry try to come out with more simplified annuities that make it easier for people to know what they're buying as a base product, and then they can add on different features for their different life stages," she says. "I think that's the wave of the future."
As part of Sun Life's survey of 477 advisors that didn't deal with annuities directly, 92% of respondents said clients alter their retirement income plans after retiring, mainly to avoid running out of money or to meet nondiscretionary costs. A smaller number of clients change their plans because they want more money for discretionary spending.
IRS Renews Focus On Offshore Accounts
The IRS has implemented a new voluntary disclosure program to motivate investors hiding money in offshore accounts to come clean-or else. The program follows a similar effort in 2009 that went down after a whistle-blower said the Swiss bank UBS held billions of dollars for U.S. customers in secret bank accounts.
The U.S. government sued UBS and sought the names of 52,000 American depositors with secret accounts at the bank (4,500 were eventually handed over). The IRS offered amnesty to people who fessed up about their secret accounts and paid back taxes, accrued interest and penalties. Those who didn't-and got caught-paid hefty penalties and in some cases faced criminal prosecution.
According to the IRS, roughly 15,000 people voluntarily disclosed offshore accounts from all over the globe before the program ended in October 2009, bringing in undisclosed yet "significant amounts" of unpaid tax. Now the IRS has rolled out a new voluntary disclosure effort that ends August 31.
"All the major accounting and legal organizations wrote letters to the IRS asking to bring back the program because they [the IRS] would make a lot of money if they did," says Robert McKenzie, a partner in the white-collar criminal defense and tax practice at the Chicago-based firm Arnstein & Lehr. He adds that he has clients who wanted to confess but held back because they didn't know what the terms would be.