Thought Leadership

Annuity Interest Signals Evolution in Retirement Approach for Young Investors

March 11, 2022
Author: Linda York

In 10 years we’re likely to look back at 2020 and 2021 as a unique, 24-month turning point for the way Americans view and interact with the financial markets. And it’s not just because of COVID-19. People of all walks of life are more tuned in to what’s happening on Wall Street on a daily basis, and that attention has been followed by action.

The emergence of the blockchain into the vernacular along with the massive disruption caused by the global pandemic has reshaped investor behaviors across the board, with participants in all income and age brackets increasingly eager to have a more hands-on role in assembling their portfolio. Whether they’re throwing pandemic stimulus checks into individual stocks or using freed-up discretionary spending dollars to buy cryptocurrencies or non-fungible tokens (NFTs), portfolios are changing.

Meeting this big bump in activity is unprecedented volatility, from rising inflation and the impact of individuals’ tweets on stock prices to the instability that the market faces in times of war. With all these twists and turns, it’s easy to assume amped-up investors with portfolios of all shapes and sizes taking unprecedented risks with their money. But, in the case of young affluent investors, we’re seeing quite the opposite.

In our recent Annuity Brandscape report, we noted that Millennial affluent investors express remarkably strong interest in annuities as one of their top retirement investments. Counter to the mindset of many financial advisors that annuity products are best suited for older generations, Millennial affluent investors are taking matters into their own hands, effectively going around the advisors they pay to manage the other parts of their portfolio to buy annuities directly from providers. Unfortunately, many annuity providers are being caught off guard, hindered by traditional advisor-sold distribution practices that render them unable to keep up with demand—or without the infrastructure to sell direct-to-consumer in the first place.

The result is unmet demand among increasingly curious, interested and motivated affluent investors.

This surge among ready-to-act Millennials, while unexpected by advisors and providers alike, is fairly easy to understand. This digitally native group wants a rock-solid, foundational investment vehicle it can rely on for modest, but reliable gains. Less reliant on government programs such as Social Security and Medicare, these younger affluent investors are seeking their own source of comfort when they’re facing an uncertain marketplace while enabling the confidence they need to pursue new and exciting investment opportunities, from NFTs and the metaverse to whatever Elon Musk tweeted about this morning.

It’s not often you see new growth opportunities in the annuity market. Yet these younger, more affluent investors are certainly opening the door. They have an eye on building financial security for retirement, but also want to be actively involved in the potential upswings that define the current investment environment. To capitalize on this emerging trend, providers and advisors alike need to find ways to meet these affluent investors’ demands by dropping their preconceived notions of the target market for annuities—even if that means developing new ways to sell annuities.

To learn more about this unique group of affluent investors, click below to review what’s included in the full Annuity Brandscape report.

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Linda York
Linda York
Senior Vice President, Cogent Syndicated

Linda York is a senior vice president in the Cogent Syndicated division where she leads the Wealth Management Syndicated Research & Consulting practice. She has over 20 years of experience in financial services spanning responsibilities in finance, marketing and business strategy. Before joining Escalent, Linda was the practice director of Syndicated Research at Cogent Research, where she managed the product development and execution process for syndicated research projects and consulted with dozens of clients in the retail and institutional wealth management space. She earned an MBA in marketing from the University of Connecticut and a bachelor’s degree in mathematics from Mount Holyoke College. Linda is an avid equestrian and a two-time finisher of the Boston Marathon.