Study asks if annuities help financial advisors build client relationships

Although many financial professionals know the value of annuities in protecting their clients’ assets and generating retirement income, they are uncovering another benefit: Annuities are helping them create long-lasting relationships with their clients.

According to recent survey results from Nationwide, 73% of financial professionals who sell annuities believe that they help them hold on to their clients. Additionally, 81% of those with higher production – those who have sold at least 10 annuities in the last 24 months –feel that they make their client relationships “stickier.”

Why many believe annuities help build relationships

“We know from talking with financial professionals that annuities sometimes require more explanation and guidance than other solutions – which can lead to deeper conversations and more frequent connections with their clients,” said Rona Guymon, in explaining why many advisors believe annuities help build client relationships. “These types of meaningful interactions allow financial professionals to understand their clients’ long-term goals as they work together to build a holistic plan, setting the stage for a relationship that’s built to last,” she said. Guymon is senior vice president of Nationwide Annuity Distribution.

One key benefit of annuities is the protection and guarantees provided, added Guymon. “In times of volatility, like we’re seeing today and have seen in the past, those protections and guarantees give customers peace of mind around a portion of their portfolio. Additionally, there’s also the potential to carry that relationship on to the next generation as advisors work with annuity owners’ heirs,” she said.

How annuities help in building client relationships

Financial professionals often take on the role of educator when it comes to selling annuities, Guymon said, in explaining how annuities help in building client relationships. “Not only do they help their clients understand how an annuity can help them protect against market volatility, serve as a reliable source of retirement income and diversify their portfolio, but they also told us they spend time breaking down misconceptions too.” These conversations build trust and demonstrate financial professionals’ expertise, showing clients they are committed to their financial well-being. When clients feel secure about their financial future, this can lead to increased trust and loyalty, making the relationship “stickier” and creating meaningful, long-lasting partnerships, she added.

In addition to assisting them build long-lasting relationships, financial professionals recognize the value of annuities’ key benefits in helping their clients prepare for retirement – especially in today’s turbulent market environment, the survey said. Ninety-one percent of the respondents agreed that annuities help their clients protect against market volatility, and 86% said they help them diversify portfolios.

Challenges faced in incorporating annuities

While the benefits of including annuities in holistic plans are clear, financial professionals are still facing challenges in incorporating them into their client portfolios, according to the survey. Although 27% of their clients own at least one annuity, financial professionals across all distribution channels (broker dealer, wirehouse and registered investment advisor) said that they would prefer that 38% have one or more annuities in their portfolio. But they are deterred from reaching this goal by several obstacles.

For example, clients’ perceptions that annuities are overwhelming (60%) and external factors like TV, radio and podcast shows that diminish annuity appeal (54%) pose challenges for financial professionals as they work to educate clients. Additionally, 78% said that clients have negative annuity preconceptions.

“Because there is so much information out there about the benefits and drawbacks of annuities, it’s understandable why some clients might find them confusing or come into a conversation with an incorrect understanding of how they work,” Guymon said. “While it’s fair for commentators to discuss why annuities might not be right for every investor, some investors may interpret that as meaning they are not right for any investor – which is not true. It’s important to stick to fact-based messages with clients to dispel misinformation, helping to break down common myths so they can understand how annuities might fit with their specific needs and goals.”

In order to effectively sell annuities, break down misconceptions and build trusting relationships with their clients, financial professionals said that they are turning to annuity carriers for help, specifically when it comes to materials that they can use to educate their clients. Fifty-four percent said they are seeking client-facing materials on annuities as a source of guaranteed income, and 43% said they want more on annuities’ role in an overall financial plan, according to the survey. “Financial professionals should lean on annuity providers for help in educating clients on the role that annuities can play in their portfolios,” Guymon said.

Selling more annuities

So, what does it take to sell more annuities? First, it is important to understand the client profiles for each type of annuity, Guymon said. Working with their local wholesaler will help financial professionals understand which client is best suited for each annuity type. Secondly, they could begin to identify which client profiles they have within their existing book of clients and start working on case design scenarios with their wholesaler.

“I would also recommend learning a few key annuity solutions and practicing your knowledge and presentation of those products prior to sitting down with a client,” Guymon said. “In addition to the local wholesaler, many firms also have their own annuity desk that an advisor can lean on for education, product comparison and case design.”

The Nationwide Retirement Institute offers access to planning tools and consultative support that financial professionals can use to help break down topics like annuities with their clients, helping to build a trusted and lasting relationship. The research was conducted online by Nationwide Mutual Insurance Company and Zeldis Research from September 5-24, 2024, among 504 financial professional respondents. Respondents had to be annuity-producing financial professionals with at least three years of experience as financial professionals.

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