Understanding the Consumer Experience of Buying an Annuity

Significant milestones and life events, such as approaching retirement or experiencing an unexpected loss of a partner/spouse, could prompt a consumer to look into purchasing an annuity. These moments of realization may lead a consumer to clarify their financial goals and identify the products they would like to invest in.

What do consumers want?
At this stage, consumers are beginning to associate a change in their financial needs with the changes happening in their lives. In particular, those nearing retirement are often looking to secure guaranteed income and may be interested in reducing risk.¹

What problems could clients encounter?
Some consumers feel they don’t have enough knowledge of annuities and may be frustrated by the inability to relate emerging goals to specific products. In one survey, almost half of people that don’t own an annuity reported they don’t have a good understanding of the benefits an annuity can provide.² This can leave clients feeling overwhelmed, and it’s important to help them feel prepared for a comfortable financial future.

What can you do?
Staying in regular contact with clients can help you keep up to date with changes in their circumstances. This enables you to give them guidance at the earliest opportunity on the products they might need. For prospective clients, consider reaching out to them with educational marketing materials that relate to milestones and life events.

At this stage, many consumers will be actively researching and may have begun to look into annuities. How much research they do depends on the individual and their prior experience. Some may talk to family and friends, search online, and become receptive to relevant content on TV and radio, but others will go straight to a financial professional to help them understand the benefits and risks that annuities may provide.

What do consumers want?
They typically want information specific to their personal situation and needs and are looking for products that can provide income during retirement.³ Many consumers will base their research of annuities on prior experience of building a retirement portfolio.

What problems could clients encounter?
Since there are many types of annuities and their contracts can be complex, issues for consumers at this stage may include conflicting opinions or misunderstandings about annuities. To illustrate this, only 1 in 4 participants in one study could answer 7 out of 10 questions about annuities correctly.⁴ This lack of knowledge can lead to some consumers feeling overwhelmed.

What can you do?
Help consumers build confidence by working with them to improve their knowledge of annuities. Consider recommending trustworthy independent experts and useful online resources like our Annuity Income Calculator. Seminars and webinars can also provide valuable opportunities for consumers to ask questions and exchange information.

Consumers should discuss if an annuity is right for them with a financial professional. Helpful conversation starters may include investment amount, timing, and risk factors as well as how these factors may impact their financial goals.⁵

What do consumers want?
Consumers are looking for a trustworthy financial professional who can educate them and help find a product that fits their needs. Over 50% of people in one survey reported that transparency is an extremely important factor when selecting a financial professional.⁶

What problems could clients encounter?
At this stage, some consumers could find the search frustrating because they may not know who to trust and might be concerned about the fees and commissions they could be charged. They may also struggle to understand too much information and unfamiliar financial terms.⁷

What can you do?
Consider giving prospects and clients guidance on how to prepare for your meetings, such as providing a checklist outlining the information they will need to bring with them. Share your credentials and be transparent about your fees and commissions by explaining what clients would be paying for. Recommendations are often a source of referrals, so talk to existing clients to find out if they have loved ones who could also benefit from your services.

When clients meet with a financial professional to discuss their financial goals and choose which annuity recommendation most closely meets their needs, they’re looking for guidance that is simple and straightforward. Research shows that 22% of consumers were unhappy with their current financial information because it was too complex to understand.⁶

What do consumers want?
Clients are looking to get down to specifics. They want to understand the relevance of their needs to the products they’re discussing, and they want a financial professional who will offer personalized choices. About two-thirds of Americans say it’s very important to work with a financial professional that can provide a customized plan for them.⁶

What problems could clients encounter?
A wide variety of doubts can delay or even halt a purchase at this stage. One study shows that 6 in 10 clients were not satisfied with the financial information they received because it was too generic and did not meet their unique needs.⁶

What can you do?
Work with clients holistically to understand any issues that are influencing their personal decision-making. Spend time discussing how the recommended annuity product, including any quotes and fees, can affect their plans. Conduct these conversations over a number of meetings so clients don’t feel pressured or overloaded. Clients often want to know how products will perform over time, so you may want to cover likely scenarios in detail with them.

At this stage, clients and financial professionals will set up the agreed transaction/purchase, complete applications, and go through the necessary processes to finalize the purchase.

What do consumers want?
Clients typically want the transaction executed with minimal effort and inconvenience.

What problems could clients encounter?
Clients likely have committed to their strategy by this stage, but they still might not fully understand the process. If a client is unsure about the contract or having second thoughts about their investment, they have a set time frame (depending on the contract) to cancel the policy. Taxes or surrender charges may apply for changes made after that set period of time.⁵

What can you do?
Explain the process to the client and consider giving them a checklist of what they need to prepare so they have all the documents and information up front. Check in with the client regularly to keep them informed on timing and progress, which will allow you to proactively navigate any lingering concerns.