Insights | 09.16.20
Why Annuity Demand Fell During the COVID Crash
David Blanchett, head of retirement research for Morningstar's Investment Management group, Michael Finke, professor of wealth management at The American College of Financial Services, and Timi Joy Jorgensen, an assistant professor and director of financial literacy at The American College of Financial Services, present research on how the coronavirus pandemic may have affected demand for annuities. They state, "Although the market for income annuities is small enough to be considered a “puzzle” by most economists, it’s clear that demand for guaranteed income is high particularly among mass affluent consumers. But people won’t buy a product they don’t understand, and annuity knowledge is clearly limited. The wealthy, financially sophisticated consumers who understand annuities are least likely to value them (although the recent financial crisis has increased their interest). Respondents who most wanted to avoid risk didn’t understand how annuities enhance retirement security by providing lifetime income. Advisors must play a crucial role in helping consumers understand how annuities provide value in meeting demand for income security among a growing population of Baby Boomers who do not have an employer pension."
Read the full article on Advisor Perspectives.