Lifetime income products an opportunity for advisers: report

As an unprecedented wave of Australians prepare to retire in the near future, and the rising cost of living continues to feed financial anxiety, some are beginning to look to guaranteed lifetime income or lifetime annuity products as a viable solution.

In its latest white paper, Retirement Income Products Reframed, Allianz Retire+ encouraged advisers to build their understanding of lifetime income products to prepare for the continued growth in interest as new solutions come to market with better offerings.

While many advisers may have been hesitant to use these products in the past, partly due to their perceived complexity, associated costs and limited growth potential, the report explained that emerging solutions are focusing on increased flexibility and accessibility, while greater product innovations are helping bring down the costs.

“Advisers with a profound understanding of guaranteed lifetime income solutions will attract new clients seeking guidance to maximise their retirement outcomes,” the report said.

Acknowledging the valuable role superfunds and other retirement saving schemes play in providing a source of income for life after employment, the report said that “Australians also need reliable retirement income to fund their longer lives” as medical advancements continue to increase life expectancy, thus the need for guaranteed lifetime income products.

Further highlighting this, chief product and marketing officer for Allianz Retire+ Simon Aboud noted: “Since the Superannuation Guarantee was introduced in 1992, Australians have gained a decade of life expectancy. That’s an extra 10 years to fund, an additional 10 years of income to source.”

Aboud explained that Australians are looking for new, innovative solutions to help fund their golden years, particularly as the cost of living and market instability continue to feed financial fears.

“While retirement planning has historically focused on helping clients to accumulate wealth, as lifespans lengthen and retirement journeys evolve, a new mindset has emerged – one that focuses not on only accumulation, but on a reliable and sustainable income stream,” he said.

He explained that a lack of understanding and limited product options on the market has increased the “likelihood of retirees resorting to suboptimal self-insurance measures, such as frugality, to stretch their savings”.

“One of the biggest fears retirees have is running out of money; either because they outlive their savings or because it’s eroded by external factors such as market volatility or inflation,” Aboud said.

“Being able to grow retirement savings while reducing or limiting investment risk and securing the certainty of a stable and sustainable guaranteed income for life is becoming increasingly important to Australian retirees.”

Approaching the conversation

When having the conversation with clients about guaranteed lifetime income products, the report made several suggestions for advisers, all of which were founded on good communication and a clear understanding about the products available on the market.

One such suggestion explained that advisers should make sure they have a clear understanding of their client’s objectives for their retirement and then help them understand how this type of product can allow them achieve those goals.

Further, the report said advisers should be sure to address any misconceptions about lifetime income solutions as many still lack an understanding of how these products work.

It also reminded advisers to come prepared for questions from clients, using their deep knowledge to help soothe their concerns, and be prepared to offer potential solutions or alternatives and provide them ample information to help them decide if the product is right for them.