Insights | 06.12.19
Annuities Get No Respect: New Study Confronts Misconception
Fixed-rate and index annuities provided the lion’s share of revenue as banks and credit unions launched their investment services offerings in the 1980s and 1990s, yet as the bank insurance and securities community has matured, annuities get no respect. They are looked down upon as an investment product on training wheels, an inefficient way to save for retirement, and a one-and-done transaction product. Financial institutions want to switch to advisory products, which provide ongoing fee income and are thought to create deeper relationships with clients.
But a new study throws cold water on that presumption. Kehrer Bielan has demonstrated in a series of studies that developing an investment relationship with a bank customer or credit union member increases the client’s loyalty to the institution. Digging deeper into those findings, we see that selling a fixed-rate or index annuity to a client increases their loyalty to the institution more than selling them an advisory product.
Thirty-nine percent of all U.S. households say they would not switch their primary banking institution. But if households own a fixed-rate or index annuity purchased where they bank, this measure of customer loyalty jumps to 64 percent, compared to 54 percent of households that have an advisory account at their primary financial institution. Advisory accounts are a relationship building product, but not as much as fixed-rate and index annuities.
Indeed, selling fixed-rate and index annuities appear to create greater loyalty to the institution than any other investment product. Yet annuities are often overlooked.
The new study, “Fixed-Rate and Index Annuities Get No Respect,” was conducted by Kehrer Bielan Research & Consulting, and sponsored by Eagle Life Insurance Company. The analysis is based on the 2018-2019 MacroMonitor, a nationally representative survey of 4,100 households. This gold standard of consumer financial surveys has been conducted every other year since 1978 by the Consumer Financial Decisions Group of Strategic Business Insights, formerly SRI Consulting. (Click this link to obtain your complimentary copy.)
Eagle Life Insurance Company is a provider of fixed and fixed index annuities marketed through broker-dealers and banks. The company is a wholly owned subsidiary of American Equity Investment Life Insurance Company®, headquartered in West Des Moines, Iowa. Eagle Life is committed to providing products with integrity as well as superior service to the representatives it partners with and their clients. Renewal rate integrity is fundamental for maintaining these relationships. For more information, please visit www.eagle-lifeco.com