In the world of annuities, financial advisors should feel obligated to educate their clients on every annuity they own or hope to buy. To better understand why this is the case, Financial Advisor Magazine recently spoke with Ashfield Capital Partners Portfolio Managers Adrian Fadrhonc and Lyman Howard.
According to Fadrhonc and Howard, financial advisors need to help their clients with purchasing and holding annuities largely because most people are unaware of what they are buying or already own. Howard says, “even the people selling them sometimes do not understand them.”
Realizing the need for assistance from advisors with annuities is becoming an especially pertinent topic as fixed-indexed annuities and variable annuities are becoming more popular, or at least more talked about. According to Fadrhonc and Howard, this is mainly due to the SECURE Act allowing annuities in employer-sponsored retirement plans, the demise of defined-befit pension plans forcing investors to search for alternatives and emerging trends.
However, just because more people are becoming interested in annuities and have the opportunity to buy them does not mean more educational resources will become available to investors, according to Fadrhonc and Howard. This is where the need for help from financial advisors becomes ever important.
“The problem is annuities are dense,” explains Fadrhonc. “We distill is down to a handful of points, educate the client and then make understandable recommendations.”