FinTech’s Role in Revolutionizing Annuities – Wealth Management

The relative value of annuity products has never been greater than what insurance carriers are bringing to market today. When you compare annuity guarantees and rates to the 10-year Treasury yield, high levels of volatility and fears of mounting inflation, the attractiveness of annuities is at an all-time high.  

According to research released by Charles Schwab, pre-retirees feel particularly anxious about how they’ll manage their income and spending needs in retirement. In fact, 72% of Americans aged 55 and older that were surveyed relayed they are worried about running out of money in retirement, 57% of survey participants said they’re overwhelmed by determining how much they can spend in retirement and 60% are worried about not getting – or the thought of not getting – a regular paycheck in retirement. This is a substantial retirement readiness gap annuities can help close.

Annuities are designed to help savers address their current retirement challenges with principal protection and lifetime guarantees. They provide unique benefits that help all types of investors prepare for, and live in, retirement, no matter their risk tolerance. Annuities also allow for a more predictable investing experience by eliminating many unforeseen risks that are not protected in other asset classes. Clients know exactly what they’ll receive, which helps to inform other investment decisions.

Although the annuity vehicle can be an attractive option for retirement savers, there is no question the adoption of the product set among financial professionals has been hindered by an outdated investment process, as well as misperceptions on product transparency, fees and the real value they present clients.

This marketplace has long been ripe for digitization, and the rise of fintech is the tailwind needed to drive a revolution in the industry that will hopefully have a long-lasting impact on how savers tackle their retirement challenges.

Americans can benefit from exploring how guaranteed lifetime income can help improve their retirement planning, no matter what their objectives might be. It’s crucial for advisors to understand this and embrace technology options that might be available to help them effectively transact in the annuity marketplace on behalf of their clients.

Until recently, this was not an option. The annuity space faced headwinds that seemed impossible to overcome, which drove much of the criticism it received. But through the emergence of fintech, specifically online platforms for advisors to seamlessly access and transact in the annuity category, a new spotlight is revealing just how easy transacting in the space has become, as well as the real value these products bring to retirement savers.

It was not too long ago that many annuity applications were paper-based, and digitization of the product set was not even on the horizon. In fact, in order to transact in the annuity space, advisors had to rely on spreadsheet tracking of product training, run dozens of hypotheticals and manually log into carrier websites to manage their book of business.  

Today, the digitization of the annuity market ensures it is no longer a time-consuming process. Advisors can now turn on their computers and access objective technology platforms, like Luma, for all their annuity needs. These digital platforms are allowing advisors to not only gain online access to transact in a wide selection of annuity products offered by varying carriers, but to also learn, compare, order, configure and track products from one centralized location.

Having objective access to a wide selection of products is important, but what’s more important is an advisor’s ability to ensure they’re offering annuity products that are appropriate and suitable for their clients’ goals.

This is a timely focus as financial professionals have recently had to shift their attention from pre-existing suitability obligations to learning a new standard that the SEC put into motion–Regulation Best Interest. With Reg BI in place, acting in the client’s best interest for retirement products now includes additional education, research and time commitments for both compliance teams and their advisors. But with new digital features, finding the ideal annuity product that meets suitability requirements and aligns with a client’s best interest can be realized within minutes.

These types of cutting-edge feature bring together innovative data modeling and third-party integrations that allow financial professionals to instantly discover and test new products, easily review a diverse set of annuity products, and within a few simple clicks, deliver superior service to their clients while remaining compliant with suitability and Reg BI requirements.

Efficient and informative features for advisors to directly and seamlessly access, from any type of work environment, is a welcomed change that the rise of fintech is bringing to the annuity category.

The convergence of the annuity opportunity to help clients reach their retirement goals and fintech’s ability to reduce much of the friction that has previously hindered the transacting of the product set is the perfect combination to drive growth in the category for important years to come. By acting now and embracing what technology has to offer in the annuity space, advisors can effectively address their clients’ needs for income in retirement, as well as put them on a path to a more promising future.  

Keith Burger is the Head of Distribution – North America for Annuities at Luma Financial Technologies, a global technology platform for financial professionals to help manage and transact structured products and annuities.