The benefits of adding annuities to portfolios

Annuities can bring guarantees^†† to client portfolios and increase peace of mind for clients, all while helping RIAs differentiate their practices. 

Guarantees
Adding annuities to client portfolios and plans introduces one of the rarest and most desired features when it comes to money: guarantees. Unlike stocks and bonds, annuities can offer guaranteed protection of principal, returns, and income, providing clients with certainty in a very uncertain world. With guaranteed protection, advisors and clients can access attractive risk-adjusted returns, hedge sequence of return and longevity risks, and dampen portfolio and income volatility. Additionally, annuities are tax-deferred, opening up the door to better tax optimization and planning.^{^^}

Increasing client confidence and peace of mind

Perhaps most importantly, annuity guarantees and protection can have a meaningful impact on client behavior. Guaranteed protection of principal and returns can smooth out the emotional ride for clients by greatly reducing volatility and ensuring at least a portion of their portfolio cannot lose value. Similarly, income guarantees not only provide a spending safety net, but they also empower clients to feel they have “permission to spend” in retirement, encouraging more fulfilled, enjoyable lives in their golden years. 

Annuities as a differentiator

Annuities can serve as a unique offering for RIAs to differentiate their practice and better serve their clients. As one advisor said, “While not everyone is familiar with annuities, everyone loves certainty and guarantees.” With clients on the cusp of retirement expected to live longer, healthier lives, now is an ideal time for RIAs to add annuities to their practices and set themselves up for success in the years ahead.

Why RIAs are not using annuities today

As new fee-based annuities have come onto the market in recent years, we have heard firsthand that advisors still struggle to access these products simply because they were not built to fully meet RIA needs. We’ve identified three key challenges that have hindered RIA adoption: 

1. Poor user experience: Complicated paperwork, outdated technology, isolated workflows, and limited RIA support have alienated many advisors who may otherwise want to leverage this asset class.  
2. Licensing: The overhead of licensing and registration for an RIA firm to offer insurance products is significant while referring business to a competitive insurance agent is problematic for obvious reasons. Thus, the cost of incorporating annuities has often outweighed the potential benefits for RIAs.
3. Navigating the insurance landscape: The myriad of carriers and products and unfamiliar jargon makes it a formidable task to appropriately vet, understand, and curate the right solutions for your clients.

These challenges are exactly the kinds of problems we love to solve at Flourish.

Enter Flourish Annuities

To enable RIAs to leverage the powerful benefits of annuities for their clients, we set out to change the entire experience. Flourish Annuities aims not only to make incorporating annuities attractive, but delightful.

For each of the challenges, we built solutions. 

1. First, we brought the Flourish “just works” experience to annuities to deliver a modern platform that aims to make the process of incorporating annuities smooth and delightful: CRM integrations to prefill information, digital applications and funding, automated reminders, direct reporting platform integrations, and an easy-to-use recommendation engine that identifies annuities that meet clients’ specific investment needs.
2. Next, we built an insurance agency to serve as “The RIA’s Insurance Desk”. Flourish Insurance Agency takes on the responsibility for carrier and product selection, suitability review, and providing our signature service to you and your clients. Advisors identify the investment need for their clients and we do the rest. 
3. Finally, we built a marketplace of vetted carriers and products, eliminating the need for extensive market research or insurance expertise. The strong rates^∫∫ and carrier ratings are a testament to the quality of these solutions. 

Today and beyond

The first offering of Flourish Annuities are multi-year guaranteed annuities (MYGAs). These straightforward, simple products function similarly to CDs within an investment portfolio with fixed terms, guaranteed rates that are often higher than traditional fixed income products, and complete principal protection. With the possibility of falling rates on the horizon, now is an ideal time to evaluate MYGAs to see if they are a good fit for clients. 

Through Flourish Annuities, RIAs can leverage the many unique benefits of MYGAs – attractive fixed returns, guaranteed principal, tax-deferred growth, uncorrelated performance, and sequence of return protection – to enhance portfolios and improve outcomes. At the same time, RIAs can open the door to these solutions without the barriers of licenses, commissions, or the potential loss of business to competitive insurance agents. Essentially, Flourish Annuities enables RIAs to offer access to an attractive, safe asset class that otherwise would be too cumbersome to provide.

On the behavioral side, an allocation to MYGAs can provide a critical portfolio ballast. Having a sleeve of the portfolio that cannot have a negative return can be invaluable in smoothing out the emotional ride for clients during times of market volatility. A smoother ride yields more confident, committed, and happier clients.

MYGAs represent the first step in Flourish Annuities’ mission to transform how RIAs incorporate protection solutions into client portfolios and financial plans. We are already in the process of expanding our range of annuity options to allow RIAs to provide solutions for a broader set of client needs. From different types of portfolio protection to guaranteed income solutions, we are excited to further expand the RIA toolkit and, together, improve client lives. We look forward to this new chapter of our partnership.