Fixed-Rate and Index Annuities Get No Respect (April 2019)

Fixed annuities provided the lion’s share of revenue as banks and credit unions launched their investment services offerings in the 1980s and 1990s, yet as the bank insurance and securities community has matured, annuities get no respect. They are looked down upon as an investment product on training wheels, an inefficient way to save for retirement, and a one-and-done transaction product. Financial institutions want to switch to advisory products, which provide ongoing fee income, and are thought to create deeper relationships with clients.

But a new study throws cold water on that presumption.

Eagle Life asked Kehrer Bielan to examine:

  • The impact of selling a fixed-rate and index annuity on client relationships,
  • Why clients invest in a fixed-rate or index annuity, and
  • Who buys them.

For this study, Kehrer Bielan analyzed consumer data from the MacroMonitor, a nationally representative sample survey conducted every other year since 1978. The current survey, conducted during 2018 and released in 2019, includes 4,100 households, with an oversample of affluent households, reweighted to be representative of the US population. The MacroMonitor is the largest, most comprehensive database on household consumer financial behavior and attitudes, and includes the full detailed household balance sheet and use of products, financial services providers, and advisors. The survey is conducted by the Consumer Financial Decisions group of Strategic Business Insights, formerly a unit of SRI International.

What we found is that fixed-rate and index annuities are in fact a relationship building product and are very attractive to the large number of US households who like guaranteed investments and are tax averse. 

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  • Fixed-Rate and Index Annuities Get No Respect

    Reports/Studies
    For this study, Kehrer Bielan analyzed consumer data from the MacroMonitor, a nationally representative sample survey conducted every other year since 1978. The current survey…
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