Magazine article American Banker

Annuity Providers Facing Obstacle: Advisers' Aversion

Magazine article American Banker

Annuity Providers Facing Obstacle: Advisers' Aversion

Article excerpt

Byline: Sonja Ryst

Many wealth managers are reluctant to recommend annuities to their clients, while providers try to disassociate themselves from the product's scandal-plagued past.

The Chicago consulting firm Spectrem Group Inc. found in a study conducted in April that 70% of advisers are concerned about locking their clients into annuities and would prefer other long-term retirement products.

Mitch Politzer, senior vice president of Ameritas Advisor Services, the Lincoln, Neb., division of Ameritas Life Insurance Corp. that sponsored the study, said advisers formed the belief many years ago that annuities are inflexible and expensive and do not provide enough benefits for clients.

Firms continue to report growing revenue from annuity sales, as salesmen continue to recommend the high-commission products. June annuity sales rose 19% from a year earlier, to $4.4 billion, according to the Princeton, N.J., consulting firm Kehrer-Limra.

Nonetheless, advisers and financial executives continue to associate annuities with recent scandals such as the one at Citizens Financial Group of Providence, R.I. Regulators found that the Royal Bank of Scotland Group PLC unit sold inappropriate variable annuity contracts to elderly clients from October 2003 to March 2005.

"It's not that we're avoiding them now. We never went down that path," said Rusty Cloutier, the chief executive of MidSouth Bank in Lafayette, La. The MidSouth Bancorp Inc. unit has recommended only around 10 annuities so far this year, compared with around 20 all of last year.

Mr. Cloutier said he associates annuities with subprime mortgage lending, and his bank managed to stay out of trouble in both areas because it never got into the rush of mass marketing such products.

Geoffrey Kanner started the North Haven, Conn., wealth management firm Kanner Financial Services LLC in recent months. …

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