The Fix: Why Clients Need Fixed Annuities in their Investment Portfolios

In today's current environment with rising interest rates, fixed annuities can be a valuable stabilizer of a client's portfolio. Both financial professionals and clients agree that the protection of principal is the most significant advantage of fixed annuities vs. other fixed investments. Financial professionals can also engage a broader set of clients, as this holistic approach will apply to consumers under 50.

Our research revealed 61% of consumers who discussed fixed annuities extensively with a financial professional were much more satisfied with the advice that they were getting from their financial professional around their fixed investment portfolio.

There's a real need and ample opportunity for financial professionals to educate clients about fixed annuities.

Only about 51% really understand that bond values decrease when interest rates are rising while 31% understood tax equivalent yields. People need motivation and assistance to explore solutions and options. When there is a lack of understanding of the upsides and downsides in various economic environments, people are less focused on exploring options.

Fixed annuities sales continue to break the charts and the research shows that financial professionals can better meet client needs and stabilize the portfolio, using fixed annuities as a counterweight to rising interest rates.

MassMutual commissioned Greenwald Associates to conduct research among 1011 consumers and 250 financial professionals during March and April 2021, a moment when the Federal Reserve announced its first of many interest rate hikes. From the results of the 2022 MassMutual Fixed Annuities survey, MassMutual Strategic Distributors was able to gain a deeper understanding about financial professionals’ and clients’ attitudes and perceptions regarding fixed annuities.

The Consumer Perspective: Our recent survey showed that neither financial professionals nor consumers are very satisfied with current fixed investment returns. Consumers are interested in making sure their fixed investments can help mitigate the dramatic ups and downs of the market, but likely don't know how. 40% of consumers in our study did not know how interest rates affect fixed investments. Consumers also need guidance for an optimal balance of bonds, Certificates of Deposit (CDs) and fixed annuities.

Clients with both high and low risk investment portfolios need guidance for an optimal balance of fixed assets, especially in today’s market.

• The addition of fixed annuities can provide guaranteed, tax-deferred increases in account value, regardless of market fluctuations.
• Fixed annuities can play an incremental role to bonds, as a means of helping maximize fixed investment returns.
• Just like equities, there is an opportunity to diversify fixed returns, not just with duration and credit, but also the type of investment vehicle.
• If equities and bonds are both down, fixed annuities can help to be a portion of a fixed investment portfolio of cushion against volatility.

Our research explored both perception and reality of fixed annuities for financial professionals and clients.

• Financial professionals said only 4% of clients aged 45 to 49 are interested in fixed annuities, believing consumer interest in fixed annuities is limited to older, risk intolerant clients.
• Our survey found 58% of clients who are in that 45 to 49 age range and have a financial professional own a fixed annuity and 37% were highly interested in owning one.
• According to our survey results, we learned that financial professionals only bring up fixed annuities with 30% of clients, recommending them to only 19% of clients.
  
• According to LIMRA Annuity Research, 2022 Q2 Fixed Rate Annuity sales totaled $51,335 billion, up 40% over 2021.

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