Issue link: https://resources.envestnet.com/i/1527488
Annuities as an Asset Class for Fee-Based Advisors l 4 © Envestnet 2022 For fee-only annuities, internal costs can be reduced because advisors can charge their fees from outside the annuity. The insurance company no longer needs to charge more from within the annuity to collect fees to compensate the advisor. This can result in lower mortality and expense charges on the annuity, and surrender charges can be reduced or even eliminated. For variable annuities, lower internal expenses can allow for more step-up opportunities and upside potential. A fee-only index annuity can provide more for the options budget, since advisor fees do not have to be supported internally. This can allow the owner to enjoy greater participation in the market upside. Allowing fee-only advisors to also incorporate annuities in their planning should help to increase their exposure to the public in the coming years. I believe that financial advisors who can draw from multiple strategies and tools are best positioned to win in the long-term quest for serving and delighting the most clients. It behooves advisors to beef up their tool kits and have as much comfort with using annuities as they do investments. I hope this excerpted chapter on "Annuities and Risk Pooling" from my Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success may help with getting advisors up to speed on using annuities. This chapter provides an understanding of the value of risk pooling and mortality credits, an explanation for how different types of annuities work, and an explanation for how shifting from bonds to annuities has the potential to improve retirement planning outcomes in terms of better meeting spending needs and supporting legacy. About the Author Wade D. Pfau, PhD, CFA, RICP® is a professor of retirement income and the director of the Retirement Income Certified Professional® (RICP®) designation program at the American College of Financial Services in King of Prussia, Pennsylvania. He also serves as a principal and the director of retirement research for McLean Asset Management. He is the founder of Retirement Researcher, which is an educational resource for individuals and financial advisors on topics related to retirement income planning. He holds a doctorate in economics from Princeton University and has published more than sixty research articles in a wide variety of academic and practitioner journals. His research has been discussed in outlets including the print editions of the Economist, New York Times, Wall Street Journal, Time, Kiplinger's, and Money magazine. He is also author of three other books in the Retirement Researcher's Guide Series: Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement, How Much Can I Spend in Retirement: A Guide to Investment- Based Retirement Income Strategies, and Safety-First Retirement Planning: An Integrated Approach for a Worry-Free Retirement. Twitter: @WadePfau Website: RetirementResearcher.com Wade D. Pfau, PhD, CFA, RICP® Annuities as an Asset Class for Fee-Based Advisors l 4 © Envestnet 2022