Offer FIAs to take advantage of retirement income opportunities


Gen X designate more than $25 trillion in financial assets for retirement income. This is roughly double the amount today.

Jafor Iqbal, assistant vice president of the Secure Retirement Institute and author of “The Retirement Income Reference Book 2015,” identifies three significant opportunities in the retirement income market for the industry in general and advisors in particular.

The first opportunity is in guaranteed lifetime income solutions. According to the LIMRA research, more than 40 percent of people approaching retirement are interested in converting at least some of their assets into a product that will give them an income stream for life. The market for converting these pre-retiree assets into future guaranteed income is an estimated $575 billion. The research found that there are also considerable numbers of current retirees looking for a guaranteed income stream, which represents another $180 billion. Combining the two, the total market potential for guaranteed lifetime income solutions is potentially about $750 billion.

The second opportunity is in the rollover market. The current size of the rollover market is an estimated $455 billion, but LIMRA research projects this will grow to $550 billion by 2018. About a quarter of individuals say they are strongly motivated to roll money out of defined contribution plans if they discuss the matter with an advisor before they retire.

The proposed Department of Labor (DOL) fiduciary regulations may have a big effect on these rollover discussions and the market’s potential in the future. According to a report from management consultant Oliver Wyman entitled Distribution Disruption, the DOL’s “latest proposal to expand the definition of a fiduciary under the Employee Retirement Income Security Act (ERISA), if adopted substantially in its current form, will cause significant disruption to the advice landscape surrounding 401K rollovers and IRAs and will have substantial knock-on effects for retail insurance distribution channels generally.”

Retirement income planning represents the third area of opportunity. Research from the Secure Retirement Institute consistently demonstrates that consumers are concerned about not having sufficient money during their retirement years. More than 40 percent of pre-retirees report that they’re not confident about their retirement security. Retirement income planning can effectively address these worries. Those with a plan in place also feel more confident about their retirement security, trust their advisors more and consolidate assets with their advisors.

Advisors can take advantages of the opportunities and provide their customers with retirement products that will meet their needs for guaranteed lifetime income. A fixed indexed annuity (FIA) with a guaranteed lifetime income benefit can fit the bill perfectly.

Jim Poolman, executive director of the Indexed Annuity Leadership Council (IALC), said that Gen X and Gen Y in particular aren’t sure what kind of guaranteed income they’ll get at retirement.

“We’re working to educate those folks that putting money into a FIA product as part of the safer portion of the retirement plan can guarantee their income during retirement,” Poolman said.