New AllianceBernstein & Insured Retirement Institute Survey Finds Market Uncertainty Has Increased Demand for Variable Annuities

NEW YORK, April 2, 2012 /PRNewswire/ -- Consumers and financial advisors, increasingly concerned about meeting retirement goals, are finding that variable annuities (VAs) effectively address financial security concerns, according to a new survey by AllianceBernstein L.P. (AllianceBernstein) and the Insured Retirement Institute (IRI). The study, unveiled today at the IRI Marketing Summit, offers insights into how and why financial advisors are using VAs as demand for more predictable and steady income increases.

"The fact that fewer people today feel confident that they will be able to meet their financial needs in retirement is driving a robust market for lifetime income solutions," said IRI President and CEO Cathy Weatherford. "Our survey found that more and more financial advisors are turning to VAs as a sound portfolio solution because they provide guaranteed income and can help clients attain financial security in retirement."

Investors and Advisors Find More Value in Variable Annuities After the Crisis

The 2008 financial crisis has changed a lot of minds about insured retirement solutions, namely variable annuities. Amid the upheaval, many strategies were less effective in limiting losses than expected -- or made things worse. As advisors looked for a way to avoid a repeat of this experience, they focused more closely on the design of the variable annuity, with its explicit guarantee of retirement income. More and more, VAs are being seen as an important solution for investors.

"Clients clearly have a strong appetite for the benefits of variable annuities, and it is important that the industry better communicate how they can become a key portfolio ingredient," said Michael Hart, Managing Director of Insurance Services at AllianceBernstein. "We found that the more educated advisors are, the more likely they are to use variable annuities in client portfolios, and not surprisingly, the happier the client."

The survey segmented participants into three categories:

• Sellers (sold more than 10 contracts per year)
• Dabblers (sold between 1 and 10 contracts annually)
• Non-Sellers (sold zero contracts)

Financial advisors were surveyed about their feelings -- and their clients' feelings -- toward guaranteed income solutions and VAs.

Key findings include:

• Investors Seek Stability. Clients want secure retirement income above all else.
  • 73% of dabblers and 79% of sellers said they never want their clients to have a year like 2008 again and will therefore continue to recommend VAs.
• VAs Gain New Respect. The market crisis of 2008 opened many clients' and advisors' eyes to the benefits of VAs.
  • 50% of respondents said they started recommending VAs more because their clients are demanding "guaranteed investments."
  • 57% of respondents said they increased their use of VAs because the "designs have become more attractive."
• VA Advocacy Is On the Rise. Advisors have dramatically increased their recommendations of VAs since 2008, mostly in response to greater client demand for guaranteed income.
  • 49% of dabblers have increased their recommendations for VAs since the credit crisis.
  • 60% of sellers have increased their recommendations for VAs since the credit crisis.
  • 42% bring up VAs in "every conversation" with clients and see them as an important part of financial planning solutions.
• Top VA Sellers Appear to Be More Successful. Top VA producers tend to have more successful practices... and more high-net-worth clients.
  • Roughly 45% have a combined fee- and commission-based compensation structure, most of which is commission-based.
  • More than seven out of 10 sellers have more than a decade of experience in selling VAs, compared with roughly half of non-sellers and dabblers.
  • The average allocation for new clients is 29% VAs, 14% mutual funds, 14% IRAs, 8% life insurance, 6% unified managed accounts/mutual fund wrap accounts and 29% other.
  • Approximately a quarter of sellers had assets under management in excess of $100 million.
  • Nearly a third of sellers had annual revenues (fees plus gross commission) in excess of $500,000.
  • Sellers have double the number of high-net-worth clients (with investable assets between $1 million and $29 million) of dabblers and one-third more than non-sellers.
• A Better Understanding Changed Minds. Learning more about VAs' benefits from a colleague or wholesaler turned skeptics into advocates. Increasing educational efforts for financial advisors in this regard could give VAs even greater traction.
  • More than 70% of dabblers and sellers say that a colleague or wholesaler influenced them to begin recommending VAs.

Selected Quotes from Survey Participants

Financial advisors surveyed offered many insights into how and why they are using VAs, including the following:

• I wanted to offer my clients guaranteed growth and guaranteed retirement withdrawals with very little risk.

• Product enhancements made them more reasonable for clients and their needs.

• I learned more about them... [now] I understand how they work and why they should be used.

• I will offer variable annuities when I discover that their retirement cash flow will not last to the age they want.

A More Open Dialogue

While the search among investors for a better shock-resistant strategy has sparked renewed interest in the benefits and safeguards of variable annuities, the study notes that more can be done to facilitate the conversation between advisors and clients.

"Advisors should be educated on the fact that their clients are looking for the protection and growth potential variable annuities offer, and have shown a willingness to pay for these features," noted Hart. "We believe that advisors should proactively discuss the appropriateness of insured investment solutions as an integral part of most clients' overall retirement investment strategy."

About the Survey

The survey was commissioned by AllianceBernstein and IRI and conducted by market research firm InsightExpress. Targeting individuals who have either a FINRA Series 6 or FINRA Series 7 and an insurance license, we wanted to understand how and why they're using variable annuities in their practices. Eight out of ten respondents use these products, and nearly a third of those sold more than 10 contracts in the past year.

The survey specifically examined whether the 2008 financial crisis had changed advisors' and investors' attitudes about variable annuities. Moreover, the survey looked closely at why some financial advisors use variable annuities as a primary retirement solution while others don't.

The survey was conducted online and more than 500 advisors participated. The survey consisted of 34 questions about advisors' practices, their clients' demographics, asset allocation of investment portfolios, strategies for managing retirement income, risk and, ultimately, variable annuity sales. It has a margin of error of 6.14%. For a copy of the survey please contact: [email protected]

About IRI

The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry. Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: our members are the major insurers, asset managers and broker-dealers, and more than 150,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella. IRI's mission is to: encourage industry adherence to highest ethical principles; to promote better understanding of the insured retirement value proposition; to develop and promote best-practice standards to improve value delivery; and to advocate before public-policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.

About AllianceBernstein

AllianceBernstein is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private clients in major world markets.

As of December 31, 2011, AllianceBernstein Holding L.P. owned approximately 37.9% of the issued and outstanding AllianceBernstein Units and AXA, one of the largest global financial services organizations, owned an approximate 64.4% economic interest in AllianceBernstein.

Additional information about AllianceBernstein may be found on our internet site www.alliancebernstein.com.

SOURCE AllianceBernstein