Although they offer a good opportunity for creating sustainable, long-term retirement income, annuities are sometimes overlooked by Canadians. There are some common misconceptions about annuities that prevent consumers from investing in a vehicle that provides guaranteed lifetime income.
Clients sometimes focus on the fact that an annuity is generally not redeemable, which could then create difficulties in the event of an emergency that requires cash. However, if a client spends funds that are ear-marked for their retirement, the chances that they will end up destitute increase. Studies have shown a correlation between annuity purchases and post-retirement happiness. This may be due to the predictable and regular income that annuities provide.
“CANNEX provides tools and services that help advisors engage their clients in conversation about annuities,” says Lowell Aronoff, CEO of CANNEX Financial Exchanges Ltd. “These tools enable advisors to frame annuities as guaranteed income for life, as opposed to a risky investment. The client has saved for retirement to make sure they will always have an income, and that’s what an annuity guarantees.”
There’s a wide range of tools that can help advisors provide their clients with a top quality annuities service. These include:
- An exchange that provides comparative illustrations of annuities with rates that are guaranteed by the participating carriers
- A tool to show the impact that a longer guarantee has on the client’s income from an annuity
- A Product Allocation for Retirement Income (PrARI) tool that enables advisors to determine whether their client’s desired income stream will be sustainable for life, and determine the client’s expected financial legacy
- Marketing videos that advisors can use to explain scenarios specific for every individual client
- Tools that quantify an annuity’s Internal Rate of Return (IRR) and Implied Longevity Yield (ILY), which measures the yield a client would need to receive from an alternative investment in order to keep up with the annuity
To expand their business and take advantage of this segment of the market, advisors need to be properly educated in retirement income. Clients today expect more from their advisor and will turn to a competitor if they’re not receiving top level expertise.
Getting the right information is a necessity and many Canadian advisors are looking to American certification courses in retirement income, such as the RICP, RMA or CRC, each of which provides much-needed guidance and support.
As awareness around the importance of retirement planning continues to grow, post-retirement income planning has become a priority for Canadians. A wide range of consumers, high-net-worth individuals in particular, are becoming aware of the important role that annuities play in a holistic retirement income plan. For advisors with clients that are at or near retirement, getting properly informed in this space is a no-brainer.