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Spreading Holiday Cheer

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Well, the year is winding down nicely, isn’t it? I hope you all had a wonderful holiday season.

Mine was eventful: not long before Thanksgiving an uncle passed away after a long battle with Parkinson’s Disease; I attended his funeral down in South Carolina and afterwards got the opportunity to stay over with extended family. While the time was tinged with sadness, there were also very warm re-connections with relatives over the holiday, which I hope to build on in the future.

I must add that I drove both ways by myself which was exhausting. I broke the trip up more on the way back but didn’t use the best of timing: I encountered heavy traffic over the last leg, which was the Sunday after Turkey Day. I will plan better next time!

As for our industry, a contact of mine confirmed my suspicion that we are looking at a new annual sales record when full-year 2022 data are released, thanks mostly to the contributions of fixed, indexed and registered index-linked annuities. To me that suggests the value proposition of those products is well established, albeit is still concentrated mostly on accumulation and protection.

I think gradually advisors and their clients are becoming more aware of the annuity’s lifetime income guarantee but are still reluctant to make use of it. I think more will annuitize over time, but it will take some coaxing. Perhaps a clever marketer could (say during next holiday season) spin it as “the gift that keeps on giving,” or something like that. It remains to be seen if the GLWB will become more the method of choice for income-taking; there’s no shortage of them even now and ones available on the FIA side have some rather generous (dare I say aggressive?) guarantees.

In my view, much design work has already been done to dress up annuitization, whether by allowing for greater liquidity, at least some coverage for beneficiaries, indexing payments for inflation, or providing a guaranteed floor on immediate variable annuity payments. I’m sure more new ideas can be devised but I think they will all bear a strong resemblance to what has come before.

Shifting the annuity dialogue to the income story will be more about winning hearts and minds than it will be about coming up with whiz-bang features. I think the industry has a great opportunity to build on the momentum it generated in 2022 to get clients thinking more about how they can use their contracts to ensure a comfortable retirement. Forward-thinking players should seize that opportunity.

Oh, and a Happy New Year to you all!

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