Annuities Can Make Client Relationships ‘Sticky,’ but Misunderstandings Persist

Annuities can play an important role in a portfolio, with 91% of annuity-producing financial professionals agreeing that annuities help clients protect against market volatility, and 86% saying they aid in portfolio diversification.

The Nationwide survey of 504 professionals found that 73% of financial professionals who sell annuities believe they aid in client retention, with 81% of top producers (those selling at least 10 annuities in 24 months) finding they make client relationships “stickier.”

“What might be unexpected to some is the long-term relationship that can be built with clients because of an annuity purchase,” said Rona Guymon, Nationwide’s senior vice president of annuity distribution, in a statement. “We know annuities are complex investment vehicles that sometimes require more explanation and guidance than other solutions. This presents an opportunity for financial professionals to connect with their clients on a deeper level, driving conversations to understand their long-term goals as they work together to build a holistic plan.”

Annuity Misinformation and External Challenges

Despite benefits of including annuities in holistic plans, financial professionals face challenges incorporating them into client portfolios. While 27% of clients own at least one annuity, professionals across all channels (broker/dealer, wirehouse and registered investment advisers) aim for 38%, but face obstacles in reaching this goal.

Clients’ perceptions that annuities are overwhelming (60%) and external factors, such as TV and radio shows and podcasts that often diminish the appeal of annuities (54%), present significant challenges for financial professionals striving to educate clients, the survey found.

These misconceptions are compounded by the fact that 78% of financial professionals report that clients already have negative preconceptions about annuities, making it more difficult to foster a clearer understanding of their benefits. These barriers highlight the complex task of shifting client perspectives and educating them on how annuities can play a vital role in their financial planning, according to Nationwide.

Building Trust Through Educational Conversations

In order to effectively sell annuities, break down misconceptions and build trusting relationships with their clients, financial professionals say they are turning to annuity carriers for help—specifically when it comes to materials they can use to educate their clients. Of respondents to the Nationwide survey, 54% of financial professionals said they are seeking client-facing materials on annuities as a source of guaranteed income, and 43% said they want more on annuities’ role in an overall financial plan.

“Financial professionals should lean on annuity providers for help educating clients on the role annuities can play in their portfolios,” Guymon said.

For example, the market for target-date funds with a guaranteed income annuity component saw several new entrants in 2024, and 2025 is likely to be similar, says Kelby Meyers, CEO and founder of Nestimate Inc., which tracks the in-plan retirement income market.

TIAA announced late last year that it had $50 billion in assets within in-plan annuity target-date offerings, up from $30 billion at the beginning of 2024. These offerings include RetirePlus, a version of which has been available since 2014, and the Nuveen Lifecycle Income Series, launched in mid-2023.