Annuities Have A Monopoly That Sets Them Apart

The Annuity Man

Annuities get a bad rap for some reason by most financial journalists and advisors, and the annuity industry doesn't seem to have a cohesive message to combat all the "annuity haters."  That's a total "head scratcher" to me because the despised annuity category has a monopoly that no other financial product does.  And that monopoly is extremely valuable to most people in the US, and especially to more than 10,000 baby boomers that hit retirement age every single day.

That monopoly that only annuities can provide is contractually guaranteed lifetime income.

In a "pension-less" world, that's a pretty good monopoly to have and something that the annuity industry should be promoting every single day to every single American.

Dutiful Roman Soldiers

The word "annuity" comes from the Latin word "annua," which means payment.  Roman soldiers and their families were given a lifetime income stream for their dutiful service and sacrifice for the empire.  That payment for life structure is today's Single Premium Immediate Annuity (SPIA).

People now refer to SPIAs as "retirement annuities" and "pension annuities" because these transfer of risk strategies are an important part of income flooring strategies.  With the vast majority of private companies not offering pensions to their employees, guaranteed income annuities are the only contractual solution to fill that needed retirement income gap.

No ROI Till You Die

Lifetime income annuities are a transfer of risk strategy that contractually guarantees you will never outlive your money.  If you live forever, that annuity carrier is on the hook to pay you forever.  You are transferring that longevity risk to that company, regardless of how long you live. 

That's a good thing unless you want to know the ROI (Return on Investment) on your lifetime income annuity.  That can't be calculated until you die.  Up until that point, that annuity strategy is a pure transfer of risk.  In my opinion, annuities are contracts not investments, so ROI shouldn't be part of the annuity conversation.

Industry Messaging Disaster

If current annuity industry promotional strategies continue, this colossal marketing blunder will be studied by business schools for decades to come.  If a change is made, it will probably be driven by the consumer getting more educated on the unique benefit proposition that only annuities provide.  Lifetime Income.

In a perfect annuity world, the simple income annuity types like Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), and Qualified Longevity Annuity Contracts (QLACs) would represent the majority of annuities purchased instead of the complex annuity types that currently lead in sales.  Unfortunately, those types aren't typically the most profitable for the annuity carriers and also pay much lower commission rates to the selling agent or advisor.

Annuity = Lifetime Income

Annuities don't equal hate.  Annuities equal Lifetime Income.  Any time the word annuity is spoken, lifetime income should immediately come to mind.  Call it "Pavlov's Annuity Dog" marketing.  It should be this simple.

Most businesses that have a legitimate monopoly take advantage of that and build kingdoms around that fortunate gift.  If I have anything to say about it, in the very near future, annuities will be synonymous to lifetime income.  Hopefully the annuity industry will follow my lead and take advantage of the demographic tidal wave of people looking for lifetime income guarantees in addition to their Social Security payments.

If you were in charge of the annuity industry's marketing, wouldn't you focus solely on the lifetime income guarantees that only annuities provide?  Of course you would.  It's a financial product monopoly, and a PR "no brainer."


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