The case for annuities – In conversation with new client
My faith in annuities has been restored following a brilliant call from a perspective client.
Recently, I received a call from a client who was researching the market for annuities and his interest and knowledge of the issues convinced me there is a strong case for annuities in the right circumstances.
In a wide range conversation, he said, “he just wants a regular income and recognised that drawdown would be too risky for him, especially with his concerns about Brexit”. We discussed in some depth the relative merits of single live versus joint life and level or escalating annuities. We also talked about the opportunity cost, that is for every year he delayed purchasing his annuity he would be forgoing an annual income which he may never make up for in the future.
Just like the old times
It was not just the honest and frank exchange of information and ideas that impressed, me it was also a reminder of how conversations about annuities used to be before they were commoditised by the large brokers and insurance companies. For instance, it was not just about getting the highest annuity income and playing one broker or adviser against another, it was about discussing what was going to the best solution for him. This included discussion about my three key questions:
Three key questions
- When is the right time to purchase an annuity?
- What are the most appropriate options?
- Which company is offering the best rates?
Advice v no-advice
The conversation ended with a comparison between the full financial advice that I provide with the no-advice broking service provided by some of the well-known brokers and insurance companies. All I will say is that my advice for ‘jolly good’ advice was less than the annuity commission form the non-advised brokers.
The case for annuities
I am now minded to update my guide, ‘the case for annuity’, as this sets out many of the arguments for and against annuities which were discussed during this conversation.