Displaying items by tag: retirement

Thursday, 28 March 2024 06:22

Annuity Sales in 2023 Reach New Records

Annuity sales in 2023 were up 22% compared to the previous year, reaching $355.4 billion. The biggest contributor to this growth was the independent sales channel, which now accounts for 40.6% of all annuities sold, totaling $156.2 billion. In 2022, independent agents and brokers accounted for 38.7% of sales. They also accounted for 74% of all fixed indexed annuity sales.

The growth in total annuity sales is due to rising interest rates and the large number of Baby Boomers who are entering or nearing retirement. In terms of categories, income annuities saw the largest increase in sales, at 45% for single premium immediate annuities and a 97% increase for deferred income annuities. 

While most categories saw growth, traditional variable annuities were an exception, as sales dropped by 17%. In contrast, registered index-linked annuities displaced some of these sales as the category had a 15% jump in sales. These annuities offer investors downside protection and limited upside and total $47.4 billion in sales in 2023. 

Keith Golembiewski, the head of annuity research at LIMRA, believes that RIAs are a source of future growth for variable annuity sales. These annuities offer upside potential and allow for deferral of taxes, making them ideal for older clients. Currently, RIAs are a small but growing source of annuity sales. 


Finsum: Annuity sales hit new record highs in 2023. Some major reasons are an uncertain economic outlook, Baby Boomers nearing retirement, and high interest rates. 

Published in Wealth Management
Thursday, 28 March 2024 06:17

Annuities Could Be Pension Replacement

In the face of escalating inflation, Americans are increasingly longing for the retirement security once provided by pensions, a sentiment reflected in a survey revealing widespread concerns about the reliability of existing retirement plans such as 401(k)s.

 

 This shift away from traditional pensions stems from their expense and risk for companies, leading to the widespread adoption of defined contribution plans like 401(k)s, which place the onus of retirement planning on employees. However, the recent surge in inflation has exposed the vulnerabilities of 401(k)s, particularly for older adults nearing retirement. 

 

To address this, there's a growing interest in annuities, which offer a guaranteed income stream and can be seen as a modern iteration of traditional pensions. Annuities, available in various forms including fixed and variable, provide retirees with a way to insure their income stream, offering stability in an uncertain financial landscape and potentially bridging the gap left by the decline of pensions and shortcomings of 401(k)s.


Finsum: Annuities can offer a more secure return and replace the void left by pensions for many Americans.

Published in Wealth Management
Tuesday, 26 March 2024 18:15

Fintech is Reshaping Advisor Recruiting

Commonwealth Financial Network has forged a strategic alliance with Succession Link, a specialized fintech platform focusing on M&A and succession planning, to revolutionize practice management. Through the integration of Succession Link's bespoke solution, advisors can now seamlessly identify compatible continuity and succession partners. 

 

The imperative for advisor succession planning is underscored by Cerulli Associates, forecasting the retirement of 100,000 advisors overseeing $10 trillion in client assets within the next decade.

 

Commonwealth's consolidated platform not only streamlines access to practices for sale but also furnishes advisors with valuation tools, fostering succession planning activity. Succession Link's suite of features, including compatibility scoring and advanced messaging functionalities, aligns with the overarching goal of empowering financial professionals to navigate succession challenges adeptly.


Finsum: Technology tools will be changing the game in advisor recruiting as demographic shifts begin to hit the industry.

 

Published in Bonds: Total Market

With signs that inflation is starting to tick higher and renewed concerns about the stability of banks, many investors are looking to shield their portfolio from a rise in volatility. As 2022 demonstrated, rising inflation creates conditions that are unfavorable for stocks and bonds. 

 

One way that investors can protect their portfolios is to increase their allocation to fixed index annuities. They can help investors reduce risk while still allowing for accumulation. A fixed index annuity (FIA) functions similarly to a traditional annuity as it guarantees some payment while allowing for deferral of taxes. However, the key difference is that it also tracks a specific index to allow for appreciation of the principal as well. 

 

Unlike fixed income or equities, there is much less downside risk and sensitivity to interest rates. Essentially, the FIA will not see any loss of principal in the event that the index suffers losses. However if the index has positive returns, the FIA will capture some portion of the upside. 

 

Thus, FIAs can help reduce portfolio risk and shield investors from disastrous scenarios especially if they are in or near retirement. At the same time, it ensures that the portfolio is also protected against inflation, reducing the risk that a retiree will outlive their savings.


Finsum: Risks to the outlook have been steadily rising in 2024 as inflationary pressures are once again building, and there are renewed concerns about the health of the banking system. Here’s why fixed indexed annuities are an effective way that investors can diversify and de-risk their portfolios.

 

Published in Wealth Management

The financial advice industry is going to go through major changes over the next decade due to demographics and an evolving culture. The average financial advisor is 65 years old and thinking about retirement and succession planning rather than growing their practice. For younger advisors, it presents a unique opportunity to advance their careers.

 

David Wood, the founder and chief visionary officer of Gateway Financial Partners, remarked that “There’s an overwhelming need for advisors to pick up some of these practices from retiring advisors.” Gateway Financial is a hybrid RIA with more than 170 advisors collectively managing $6.5 billion. Lately, the firm has been focusing on helping its independent advisors grow their practices through acquisitions. 

 

Wood believes that this is “the best time ever to be in the financial services space”. He believes that the demand for financial advice has never been higher, while a third of advisors will be retiring over the next decade, creating a vacuum for younger advisors. 

 

He also believes the culture is changing which will open up more opportunities for female advisors to thrive. Specifically, the industry is evolving from a focus on selling products to forming relationships and financial planning. Currently, women account for 30% of advisors, he expects that this number will increase over the next decade due these changes and the retirement wave of older, predominantly male advisors. 


Finsum: There are two major changes in the financial advice industry. One is that a third of advisors will retire over the next decade. The second is that the industry is evolving from selling products to building relationships and financial planning. Here’s why this is creating an opportunity for younger and female advisors.

 

Published in Wealth Management
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