Still, providers of annuities shouldn’t give up hope. One reason: Stocks may very well be approaching a bubble. “Annuities are designed to protect the client from market volatility,” says Jim Richards, managing partner at Annexus Ventures and board director at RetireUp, a product that classifies annuities as an asset class in building retirement income plans. “Participation annuities remain a safe haven for clients who want to protect their assets from market risk while retaining the potential for growth.”
While sales may continue to struggle in the near term, the long-range outlook is somewhat rosier. “Interest rates are highly likely to keep rising in 2018 and beyond, as the economy continues to percolate,” says Kaufman.
For annuities, that means “lower reserve requirements for insurers’ liabilities when guaranteeing lifetime income, allowing insurers to make lifetime income benefits more generous,” says O’Connor.
What makes annuities unique is what may save them. “If the industry pivoted and focused solely on the contractual guarantees that only annuities offer, then they would position themselves correctly for the next/eventual market downturn,” says Haithcock, adding, “There’s a demographic tidal wave of retirees looking for guarantees.”