Stark said: “Most financial advisors are not licensed to sell annuities. It’s a different product, an insurance product, and they’re not likely to sell it. It also means literally handing over part of their relationship to perhaps a peer at their bank or someone outside of their firm.
“They’ve spent much of their career building a strong relationship with this client and the assets are now coming off book, which means they have a financial disincentive from doing it. Plus, annuities in this ultra-low interest rate environment are yielding very low returns – and they’re totally irrevocable in many cases. Human financial psychology means we don’t like making decisions that are irrevocable.”
Other potential scenarios might be a retired client with an income-producing asset, whether it’s a business or a rental income property, that they want to exit. Or maybe that person has commuted a pension. “Investing some or all the proceeds into the longevity pension fund as a way to recreate that income is a powerful thing,” Stark added.
“Also, if you’re a financial advisor and your client has their retirement savings in a balanced portfolio of financial products, in order to generate income for them to live, you’re likely having to sell off assets periodically. That can lead to conversations with the client about strategy and portfolio allocation.
“The idea of a product that is designed, every month, to create income in highly predictable way, lets the advisor focus on building a relationship with their client, making important financial allocation decisions and not constantly revisiting strategy.”