David Stone: “Unbundling to Help Solve the Annuity Puzzle for Clients of RIAs”

Writing for Advisor Magazine, RetireOne co-founder and CEO David Stone points out that 10,000 Baby Boomers retire every day—many of them without employer-provided defined benefit plans. Without these traditional pensions to provide sustainable income in retirement, it’s no wonder 40% of Americans fear retirement more than death.

In the absence of a pension, the answer for many retirees could be to transfer the risk that they may outlive their assets to an insurance company via the purchase of an income annuity. And while annuity adoption certainly faces myriad headwinds among some investors and their advisors, more and more RIAs realize the value protected accumulation and income solutions can provide for their clients.

Our own “2021 RIA Protected Accumulation + Retirement Income Survey” showed both a high priority placed by RIA firms on retirement income planning for their clients, as well as an acute understanding of the comfort guaranteed income provides to their clients who own annuities.

Even so, among detractors’ common complaints about annuities are that they are illiquid and unfair, that the fees are too high and the plans themselves are opaque and don’t give enough control over assets to clients. According to David Stone, RetireOne co-founder and CEO:

Annuities aren’t well understood by consumers or their financial advisors. Often sold as investments instead of insurance, annuities in general are perceived by RIAs to be expensive, complex and illiquid. This, in spite of the last decade of commission-free annuity design and development.

So it could be an issue of framing, for sure. But traditional annuities can be somewhat difficult to integrate into client plans firm processes. Some investors simply prefer a solution with a smaller footprint. For those folks, further innovation is necessary.

In this article, Stone uncovers our latest innovation: a new Portfolio Retirement Income Guarantee designed to let money managers do what they do best, manage money, and let insurance companies do what they do best, manage risk.. David explains the aim of this contingent deferred annuity: decoupling the insurance from the underlying investments to provide greater control, transparency, and improved flexibility.

Unbundling the investments from the insurance allows advisors to cover client ETFs and mutual funds in IRAs, Roth IRAs and taxable brokerage accounts. It restores the advisor to their central position as portfolio builder and asset allocator, it improves client and advisor experiences and it helps overcome the issue of fairness since by allowing the asset to remain at the custodian. Oh, and any remaining account value can be passed to heirs at death.

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