Some clients are motivated by a need for certainty, said Franklin. They value outcomes that are known. Fully 76% of recent retirees in the survey had a pension, he said, versus 59% of retirees overall. At the same time, 58% of respondents who were not yet retired also had pensions, whereas only 20% of workers in general do.
“It’s not by accident,” said Franklin. “Those who have pensions consciously chose careers that offer pensions.”
They value certainty so much that they often prefer a savings account to a stock portfolio; they are more concerned about volatility than about forfeiting return potential.
What’s more, people with pensions are more likely to buy annuities, he said, because of the guaranteed income they offer.
“Most annuity holders will tell you they don’t know why they bought one,” said Franklin. “Maybe their advisor recommended it. But pension holders will definitely tell you they want the annuity guarantees.”
This is a population, he stressed, who don’t necessarily need the extra annuity income. They have sufficient assets to maintain a sustainable withdrawal program in retirement. But annuity guarantees appeals to them nevertheless.
Savers Vs. Spenders
Another surprising finding was that those who value the certainty of annuity guarantees are savers, not spenders.
“We tend to talk about annuities as a way to spend safely,” said Franklin. “But people who are positively predisposed toward annuities aren’t particularly interested in hearing about spending. They are interested in saving.”
With clients like this, you might do better telling them you recommend an annuity to protect their savings, not to help them spend safely. “It may be a stronger argument,” he said.
In conclusion, Franklin observed that financial solutions are often presented to clients in cold, hard, factual terms. “Compliance does drive us to cite facts and figures, but that doesn’t mean we can’t be talking about the emotionality of the situation, too,” he said.
Those with sufficient assets for retirement are primarily concerned about being able to maintain their lifestyle when they’re no longer working, he said. Maintaining lifestyle may register more strongly than the idea of not running out of money.
“What retirees and near-retirees most want to know is, ‘Am I going to be OK?’” said Franklin.