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Annuity Focus Changing Globally


I found an article in Australia’s Investor Daily by Samantha Hodge talking about the purpose of the annuity changing.  In “Annuity focus reprioriti(z)ed,” Hodge says that advisors are more focused on battling longevity risk than they are on accumulating more wealth now.  I think this rings true in the United States now as well as much of the developed world.  We are more focused on keeping the money that we have in retirement than chasing growth because of the economic conditions around the world.  Of course, growth would be nice too, but it has moved from being the top priority.

The top priority for advisors used to be maximizing the capital growth of their investments, according to a retirement planner report from Investment Trends.  The percentage of adviosrs who saw that as their top goal went from 77% down to only 1%.  The two focuses that have grown in popularity by advisors are maximizing clients’ income and minimizing their risk.  While only 3% and 4% of advisors had those focuses in the past, now 48% see maximizing income as their number one priority and 33% are focused most on minimizing risk.  Making sure that clients do not outlive their money is more important than ever because of volatile markets.

Annuities are one of the best ways to protect wealth and minimize, or even eliminate, risk.  Growth of annuities in Australia has been high as advisors and clients use them in balanced portfolios to meet basic living expenses.  Investors use a portion of their money to buy an immediate annuity, which will guarantee income to meet living expenses.  They can then use the balance of their savings to try and grow money in riskier investments.  Since they don’t have to worry about taking that money out for basic costs, it has time to grow and recover from any market losses.  Using a laddered approach, the first priority is now avoiding longevity risk and then we can worry about making money.

Written by Rachel Summit

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