A new report from Aite Group, LLC lists the common product features offered in the variable annuity marketplace, and describes how investors can apply each feature toward achieving personal financial goals. The report discusses fees and risk profiles associated with annuity investing, explains the inclusion of living benefits or market guarantees, and reviews the penetration of annuities among U.S. households, as well as the current and expected use of annuities by financial advisors.
While many investors and financial advisors possess limited knowledge of variable annuities, these investment vehicles have a broad range of potential uses in both pre- and post-retirement financial portfolios.
Annuities are complex bundles of sophisticated financial products, and can be difficult to understand. Despite their complexities, however, variable annuities are widely used retirement investment vehicles. Individual retirement accounts (IRAs) in the United States have a total investment value exceeding US$3.5 trillion, about 10% or US$367 billion of which is was invested in variable annuities as of year-end 2008.
“The complexity and rapidly changing features of variable annuities demand that brokerage firms distributing these products take steps to streamline the financial advisers’ ongoing level of education and understanding of them,” says Doug Dannemiller, senior analyst with Aite Group and author of this report. “Consumer education is also an important factor in the adoption of variable annuities, and is needed to reduce sales cycle times and increase product penetration.”
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