Sponsored Content: Annuities: A Perfect Fit For A Fiduciary

Fiduciary regulations continue to cause a stir in the financial community. Some have already started to be enforced while others are being rolled out. However, as the fiduciary standards continue to evolve, some experts point to a solution that should not be overlooked: annuities.

“Many advisors and clients are afraid of or misunderstand annuities,” acknowledges Lance K. Carlson, head of sales distribution at Greenwood Village, Colo.-based Great-West Financial. Yet annuities, he says, “need to be part of the conversation.”

He’s talking particularly about retirement planning. Annuities are one of the few financial instruments that can guarantee lifetime income throughout retirement. Financial advisors who ignore them are overlooking what may be a crucial opportunity for their clients.

What’s more, annuities can be a good fit for fiduciary obligations. “If you never have a conversation with clients about how to guarantee retirement income, it might not be a well-thought-out plan,” says Carlson. “Even if a client decides not to go that route, you should at least consider annuities as a viable option.”

To be sure, annuities are many and varied. It can be a full-time job just keeping up with all the options available. Great-West can help. “Our goal is to have a better educated client,” says Carlson, “and if we can help advisors become more comfortable discussing the range of annuity strategies available for helping clients secure their retirement income, they will be better served.”

Serving clients, after all, is what being a fiduciary is all about.

Consider this: clients are concerned about whether they will have enough income in retirement. Most people cannot count on pensions or even Social Security anymore. The prospect of outliving your savings is especially scary during times of market volatility.

Annuities are designed to help clients prepare for market uncertainty, rising expenses, and other unforeseen events, he says. They provide this in several ways:

First, retirement income is contractually guaranteed. There are no nasty surprises on that score. With a lifetime income rider, for an additional fee, the income can continue throughout a client’s life and even throughout the client’s spouse’s life, should the spouse live longer.

Second, annuities offer tax-deferred growth potential. You don’t pay taxes on them until you withdraw funds. Before that, the contract can appreciate in value, free of taxation. That can add up to significant savings over the years.

Third, variable annuities (VAs) can offer access to a broad spectrum of investment options. VAs allow clients to change their investment selections and trade within their contract, potentially without incurring transfer fees and deferring taxes on gains.

Finally, clients can rebalance their portfolio to keep up with current needs and market conditions, again potentially without incurring transfer fees and deferring taxes on gains1.

“With a variable annuity, you can own the same assets and have the same allocation as you might with a managed account or a mutual fund, but in a tax-deferred wrapper,” stresses Carlson. “Plus, you get guaranteed retirement income and options such as a return-of-premium death benefit so that your surviving spouse can receive back the full value you put in.2”

Of course, some advisors may not be easily convinced. There’s a tendency to lump all annuities together, to believe they are expensive with little benefit to clients. “But there are lots of different kinds of annuity products, with different purposes, appropriate for different clients at different stages of life,” says Carlson.

Indeed, not all annuities are the same. Great-West’s Smart Track® II – 5 Year Variable Annuity, for example, has several distinct advantages. First, it’s flexible. Annuitants can make changes, including turning on the income stream as needed (up to their 86th birthday). “Normally, when you buy an annuity, you have to set most or all of the terms upfront,” says Carlson. “But the client’s needs may change over time as they get older. People’s situations change. With our product, you don’t have to decide on the front end about the income, whether the contract covers one person or you and your spouse, or even what riders you want.”

To start receiving income, clients just have to get in touch with their financial advisor. They can move funds from an investment-only side to an income and distribution designation, as little or as much as they want, when they want. They can also move it back again, as desired. There are no charges or tax implications for this.3

In addition, when they start taking income they can choose single or joint lifetime withdrawals for a spouse. The same charges apply either way.4

Riders can also be added or removed at any time. “You just tell us when you need it,” says Carlson.

Another benefit is that Smart Track II allows clients to make additional contributions at any time. This can enable them to increase their income distribution. Other ways to increase income are through annual step-ups and age-based resets.5 “As clients grow into the next age band—say, from 65 to 70—the annuity potentially can give them a raise while lowering the fee,” Carlson explains.

Smart Track II doesn’t require a separate managed volatility investment, either. “So advisors can really choose the investment options that are in the best interests of their clients,” he says. “There are more than 100 investment options available.”

Even if Smart Track II doesn’t appeal to a particular client, fiduciaries shouldn’t overlook the benefits annuities have to offer. Those who do neglect to present them to clients might not be acting in their clients’ best interest.

DISCLOSURE TEXT:

Guarantees are subject to the terms and conditions of the contract and the claims-paying ability of the insurer.

Carefully consider the investment objectives, risks, fees and expenses of the annuity and/or the investment options. Contact us for a prospectus, a summary prospectus and disclosure document, as available, containing this information. Read them carefully before investing.

Securities offered or distributed through GWFS Equities, Inc., Member FINRA/SIPC and a wholly owned subsidiary of Great-West Life & Annuity Insurance Company.

Variable annuities are long-term, tax-deferred investments designed for retirement. They have associated contract fees, involve investment risks and may lose value. Withdrawals and earnings are taxable as ordinary income when distributed and may be subject to a withdrawal charge and a 10% additional tax if withdrawn before age 591/2.

Great-West Smart Track products have fees and charges including, but not limited to, mortality and expense risk charges, sales, withdrawal charges, surrender charges, administrative fees, charges for optional benefits as well as charges for the underlying investment options. The guaranteed income benefit is provided through an optional rider for an additional fee, goes into effect upon the purchase of units of a covered fund and is paid for through the sale of units of the covered fund(s), which reduces the annuity account value.

Interstate Compact contract form numbers ICC15-J888 Series (Individual Flexible Premium Variable Annuity) ICC16-GLWB-SIF, ICC16- GLWB-SIP, ICC16-GLWB-SIM, ICC16-GLWB-T-Note (Guaranteed Lifetime Withdrawal Benefit Riders) are issued by GWL&A. GWL&A is not licensed to do business in New York. In New York, contract form numbers J888-NY (Individual Flexible Premium Variable Annuities), GLWB-SIFny, GLWB-SIPny, GLWB-SIM2ny, GLWB-T-Note-ny (Guaranteed Lifetime Withdrawal Benefit Riders) are issued by GWL&A of NY. Contracts may not be available in all states.

Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York do not offer or provide investment, fiduciary, financial, legal, or tax advice, or act in a fiduciary capacity, for any client unless explicitly described in writing. Please consult with your investment advisor, attorney and/or tax advisor as needed.

Great-West Financial®, Empower Retirement and Great-West InvestmentsTM are the marketing names of Great-West Life & Annuity Insurance Company, Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: NY, NY, and their subsidiaries and affiliates, including Advised Assets Group, LLC and Great-West Capital Management, LLC. AM484510-0518

1. Rebalancing does not ensure a profit and does not protect against loss in declining markets.

2. Beneficiaries receive the greater of account value or sum of all contributions less the proportionate impact of withdrawals.

3. Unlimited transfers between sub accounts are allowed within each strategy. Some funds may impose transfer restrictions. A transfer from the Investment Strategy to the Income Strategy will trigger the GLWB fee. A transfer from the Income Strategy to the Investment Strategy may be considered an excess withdrawal. After transferring out of the Investment Strategy, the customer may be restricted from transferring money into the Investment Strategy for 90 days. A full withdrawal of the covered fund other than by guaranteed annual withdrawal or market performance will result in the cancellation of the guarantee.

4. If joint withdrawals are elected, the joint distribution percentage will be based on the younger person’s age.

5. Applies to Great-West Secure Income Foundation, Great-West Secure Income Plus and Great-West Secure Income Max only. Additional GLWB riders may be available. Income increases via annual step-ups and/or age-band income resets are calculated automatically on the ratchet date. Income increases will go into effect if the maximum GAW is elected. Otherwise, eligible increases may be elected at any time.