The annuity purchaser demographic is changing. What was previously thought of as an investment strategy for retirees is now making a foothold with a younger group of investors – a group that understands the need for a sound retirement investment strategy.
Savvy younger investors want progressive brokers who can help them build a creative and lucrative retirement package. Here's how you can do it.
Get To Know Younger Investors
Although retired baby boomers may still be the bread and butter of brokers' fixed annuity sales, smart brokers are shifting part of their efforts to focus on a slightly younger age group. And for good reason.
A Gallup and Committee of Annuity Insurers survey found that nonqualified annuity owners are an average of 51 years old at the time of their first purchase.1 In addition, nearly 40 percent of these first-time annuity purchasers were younger than age 50.1 According to a recent LIMRA study, half of all annuity purchasers are under the age of 60.2
The gender and marital status of annuity purchasers also has shifted. The majority of current annuity owners are women by the slimmest of margins – 51 percent versus 49 percent male.1 The majority of annuity owners (58 percent) are married,1 although that percentage has decreased over the years.
Younger purchasers open a huge window of opportunity for expanding annuity sales. And this group is more concerned about retirement preparedness than ever before.
Understand Their Needs
Fixed annuities are a practical option for financially conservative clients, particularly for those who want to see a return on their investment. Many workers preparing for or nearing retirement age are at a life stage in which investment objectives and risk tolerance is low. A fixed annuity can be a practical investment for those who don't want to gamble with money they've worked so hard to accumulate for retirement.
When connecting with potential clients in this age group, make sure they understand why fixed annuities can be a perfect addition to any retirement portfolio. Emphasize that fixed annuities can provide predictable future income with a guaranteed rate of return. Flexible payout options offer a lifetime income stream, and those earnings aren't taxed until the funds are used.
Annuity purchasers are getting younger. Understanding the "new" annuity purchaser, and what is important to him or her, will set you up for increased sales and a role as a trusted advisor for years to come.
1 The Committee of Annuity Insurers. 2013 Survey of Owners of Individual Annuity Contracts (The Gallup Organization and Matthew Greenwald & Associates). Available at: http://www.annuity-insurers.org/wp-content/uploads/2013/10/2013-Gallup-Survey.pdf. Accessed June 12, 2014.
2 LIMRA Secure Retirement Institute. Deferred Annuity Buyer Attitudes and Behaviors. 2012.