Annuities can be used to fill in the long-term, conservative part of a portfolio in the current low-interest rate environment, according to Ephie Coumanakos, co-founder and managing partner of Concord Financial Group based in Wilmington, Del.

“It is hard to take one’s nest egg and make it last for a long retirement, which is why fixed-indexed annuities with income riders are becoming more popular,” said Coumanakos, who specializes in retirement and pre-retirement planning, asset preservation, wealth management and estate planning.

Financial advisors should help clients find annuities with growth potential and reasonable fees, she added. Advisors also need to educate their clients about the details of the restrictions they are agreeing to when buying an annuity.

“Some people believe they will be able to take a lump sum from the annuity down the road, which, of course, is not the case,” she warned. “How much do people understand about annuities? It’s a mixed bag, but as baby boomers retire, annuities are getting more popular. They want to lock in the gains they have received in the equities market and create an income stream for the future. People are living longer so their money has to last longer.”

Financial advisors should be prepared to answer clients’ questions about the restrictions and advantages of both fixed-indexed and variable annuities. Advisors need to identify what the clients’ concerns are going to be and they need to be prepared to answer their questions, Coumanakos advised.

“My preference is to keep the annuity as simple as possible,” she said. “Clients need to be able to explain to themselves what they are purchasing. They also need to take into consideration that the rating of the insurance company selling the annuity matters.”