Transcript generated by AI. It may contain errors or inaccuracies.
Hi, everyone, and welcome to Insider Insights. I'm Tina Beckwith, chief marketing officer with LIMRA and LOMA. Today, we're joined by John Carroll, a senior distribution leader with almost forty years of experience in insurance and asset management, predominantly with Merrill Lynch and Allianz. He's here to talk about some new research from the LIMRA Retirement Income Institute that examines health related risks, health care costs, chronic illness, longevity, and caregiving, and how they're shaping retirement planning. We'll talk about what this means for financial professionals and how the industry can better support conversations around protected lifetime income.
John, welcome.
It's great to be here.
Good to see Well, so the research highlights health related risks and how they're a top concern for consumers.
You know, from your vantage point, why does it matter now?
Right. I I think it's mattered for a long time. Like, think about the graying of America. We've talked about it forever.
Right? But I think it's now it's become real. Right? So you think about it. This is really about the baby boomers.
Right? The baby boomers now make up the senior cohort. Right? You are not a baby boomer.
We've debated if I am a baby boomer. I don't think I am. But we know that the oldest baby boomers are hitting eighty and the youngest are all in their early sixties. So they are this cohort.
So now what was talk has actually happened. Yeah. So you look at that from a distribution perspective. These are the folks who have a lot of money.
Right? In general, a lot of assets in the country are concentrated in the baby boomers. So now as advisors, their practices are shifting. They're having these older clients.
These are simply conversations they have to have. So it's top of mind because as they're aging, they're they saw it or seeing it with their parents. They maybe their friends or even starting with themselves. So it's very close to home about, wow, this kite this might be a significant issue for me.
Yeah. Baby boomers and, yes, Gen X, right? We are entering this phase of life and, and it is important.
You know, as the paper talks about, right, healthcare and long term costs are really outweighing some of the market and inflation risks that people tend to worry about. You know, are advisors seeing this and how is it showing up?
Yeah, absolutely. I mean, again, think about and a lot of what I'll talk about is, you know, kind of where we've come from and where we are. So when you think about the boomers, right, this whole industry was built around them for the past forty years. So there was a point at which it was all about asset savings and asset accumulation.
Yeah. Then it shifted to, okay, they've got a lot of assets. It's about risk management. Right?
Well, now we're here. So the good adviser, their practice has to shift with their client base. So when they're talking to clients now, their clients are saying things to them like, I'm I'm afraid of running out of money. Right?
Even if they're wealthy, that happens. Right? Ultra high net worth, probably not a concern. High net worth, middle market, absolutely a concern.
And when they're saying that, they're not saying because I'm gonna have a big party and spend it all. They're saying because I'm afraid I'm gonna live a really long time. And does my asset base support that? Or worse, I'm gonna live a long time and I'm gonna have some serious health problems.
And I think it's the uncertainty of this. You you don't know what's gonna happen that is driving that concern. So, again, advisers are hearing it. The good ones are listening.
Right? They're hearing what's being said and and adjusting the conversation and starting to say, okay. What is it that we need to do? So when you think about what we're talking about, right, that's where annuities are built for.
Like we've talked about annuities for decades, right? But now the purpose of the annuity is meant to be lifetime guaranteed income. Well, it's finally arrived where this giant cohort really needs that benefit and there is something there for the advisor to talk to which maybe in the past wasn't as relevant as it is today.
Yeah. And to your point, you don't always know and that's that's concerning.
Yes, it is.
Yeah. The fear of the unknown. So, you know, with all the concerns that are out there, why hasn't annuity adoption been as even or predictable as we might think given the benefits of it?
It's a great question. Mean, I've spent my career in this space. I've always asked that question. Right?
But I think there's two things. So from the consumer perspective, consumers' annuities have been complex. Right? And there's been bad press, right, historically.
But they're very complex and the positioning was sort of not only that you don't understand it, but that you can never get your money back. And traditionally, again, if you annuitize the contract, that was the deal. Right? That Right.
You gave up liquidity, but you've got this this income stream. Well, most people, those are difficult things. And and and again, we talk about numbers all the time in this business, but the retirement planning is about numbers, it's very much about emotion. And if you people aren't comfortable and they don't understand and they feel like they're losing, they're just not gonna get there.
So that's the consumer side. From the adviser side, again, there's a lot of them who have done annuities. There's a large number, but we've never had the masses. Part of that is process.
Right? We're not here to talk about that. But I will say the work the IRI is doing is game changing in that regard. Right?
That that straight through processing.
But I think also that advisers were looking at they felt the same way consumers did. Right? Like, how does it fit? But now, I think the last six years of record after record sales tells you something has changed.
Right? At first, was about fixed rate. Right? Rates were up. People loved it. But if you look underneath that, look at the limit numbers.
The the growth rates have been fixed index annuity and RILE. Right? Registered index linked annuity. Those are products that advisors can embrace.
They are embracing because when you talk to a client, they don't talk about details. Clients will tell you, I'd really like upside. I'd to be protected on the downside. I don't need the whole market.
I want but I wanna stay ahead of inflation. Yeah. And I'd love to have income from this.
Okay. Well, that was always kinda hard to do. Well, now, these products, that's what they give you. So I do think advisers have and you're seeing it in the numbers. They've started to embrace that. So if you make the process easier, the story is there. And it's a story I think clients really will will gravitate to as FAs tell them.
And so you talk about that conversation, right? And it's so important. How do you see it showing up in the advisor client conversations?
Well, I think it depends on the type of advisor. Right? Those who are leaning going more towards holistic planning. Right?
I wanna say no, say financial planning, but holistic plan, really looking at it. They need to be proactive. Right? So not everybody wants to talk about this.
But again, I always go about demographics drive this. Right? And if your book, your practice is moving into this stage, if you wanna keep your business, you have to start addressing it. And the thing is it's super complicated.
So the good advisor is gonna get in front of this. Right? They're gonna start to talk to their clients about income planning, about the know, it's it's not about any one thing. It's the whole portfolio.
And how do you start to work that conversation in to talk about these things? And then also listening to those concerns about, I might run out of money. Right? And I might not have enough.
I might live to be a hundred. And those are scary things when, again, we talk about the uncertainty. You might you might not. Nobody knows.
So how do I plan for that? So I do think a large part of this is not just the numbers, but advisors role is to try to help soothe some of that, calm some of that fear by saying, let's have a plan and let's act. Because study after study has always shown if people have a plan, feel so much better about where they are. And if there's action, they feel even better.
Doesn't mean you'll solve all their problems, but it does make them feel more confident in where they're going and what this uncertainty what might happen.
And I have to imagine it's more than one conversation. These things happen over time and to your point, they can be difficult to introduce. So, if they can talk about it and start talking about it, then folks can really the benefits will resonate with them as they run into different circumstances.
That's right. That's right.
Now, lots of different players in the ecosystem, right? How can carriers and distributors play a role? How do they help advisers, really navigate this?
They're huge role. Right? I mean, they've got armies of salespeople out there whose job is to inform. So, again, I think as advisers have done, I think the the carriers and the distribution companies have to get away from selling product.
Right? Yeah. The the products all effectively do the same thing. Right? There's differences in in in underlying features, but that's wonky.
Right? If you wanna get the masses, we need the industry to be amplifying the same story. Right? Which is lifetime income.
Right? Which is flexibility around that. Yeah. Which is talking about these concerns that people have.
But if everybody could do that so it starts with educating the adviser. Yeah. Not selling the adviser. They don't need to be sold.
Right? They need to be educated. I've always believed that, you know, when I was selling, used to say, like, if I can explain to you how this works We will find opportunities because it's not for everybody. Right?
It's for everybody in your book. But there's certainly people, especially if you're doing none of it. There are people for whom this is really appropriate, and we need to talk about that. But they need to understand the story.
They we need to simplify the story and just tell it. You know, again, I look at it like we go in and we lift up the hood and we want them to understand everything on the side. It's like close the hood. Right?
Tell stories. I was thinking about it saying, we need to tell stories, not read prospectuses. Prospectuses. That's really the thing.
But if everybody's telling that story, then you compete on product. But until you tell a story Yeah. Those FAs who are over here, they're just not gonna get it.
Yeah. You're right. It's simple language. Right? We have to talk about the reality and to your point of stories. People, how people talk.
That's right.
A novel idea, right? That's right. Now, the research also touches on the differences between life span and health span. And I think that's really interesting because they are very different. How does that play into the conversations?
Yeah. I thought that was fascinating. And when I read the report, was like, wow, that's really I never thought of it that way. Yeah.
It it takes a very basic concept of quality and quantity, but it puts it in something very specific and I think tangible for people. People think about life expectancy, lifespan. Right? But health spans, like, that does make you sit back and say, well, what does that mean?
And they start people's faces come into your heads. Right? You think about people who lived a very long time, and those last years were not good, right, for either chronic issues or real declines, whatever. And some people are ninety five and playing tennis.
Right? You you don't know. So I think that that's a topic that is on clients' minds. They they may not raise it with you.
So, again, FAs have to listen. Right? They have to be listening for that I'm afraid of x. Right?
I'm worried about this. Or listen to them, oh, my mother lived to be ninety eight and it was really like, something like that.
We all know people Yeah.
Who are in their nineties. Right? Some are great, some are not. So I think it's just a matter of them listening and trying to understand how to get in front of this topic.
And I just love it because it really does open up conversation to say, you know, let's think about this. Think about your family history, Right? Like, how were your what were your parents like? What were your grandparents like?
That's a way in. People love to talk about that. Even if it's said, they love to talk about it. That's a way to start saying, okay, now let's talk about you.
What what are we doing? Right? What are your concerns? And then we're here. How do we get you there?
Right? And that's, again, the lifetime income story is it's not gonna solve all your problems, but it's a it's action, and it's a plan, and it gives you something that you can hold on to.
That's like, no matter what else fail, whatever else happens happens, this won't fail me.
Right.
Right? And that is just tremendous peace of mind.
Yeah. We all aspire to be that active ninety five year old, but the question is, how are we feeling secure? How do we create security for ourselves? Should that not be what plays out for us?
So listen. You talked a bit about, ago about the conversations and the storytelling and simplicity. Right? What type of framing in the conversation have you seen to be most effective?
Again, it's that whole move away from product. Right? Don't get caught up. People like, again, people I say this for years.
It's like people don't understand that. Right? In the industry, we understand. It's lingo. Right? It's jargon.
But people don't. So we have to step back and start thinking in terms of phrases and words. Again, they understand medical bills. They understand caretaking.
Like, they get that. Right? But they also understand outcomes. Right? They understand what what you're talking about.
And in our case, we can lean into and should lean more into lifetime income, protected income, dare I say guaranteed income. Right? I mean, we're allowed to say that. There's a lot and we have to be very careful and everybody's always nervous, but it's one of the only it's probably the only investment product that you can use the word guarantee on.
Right. CDs and t bills are not investments. They're cash equivalents. Right? Like, from an investment perspective, this is the only one.
So the ability to say that again, people know what guaranteed means. Right? Right. They may not believe it right away.
Right? They don't trust that. But we really do do that. And and there's it's all in the contract.
It's all that stuff. So I think that we just have to step back and, again, tell stories. Right. Don't overwhelm people with features and benefits.
They they're like, look. Is it they wanna know. Is this gonna solve my problem? Is this gonna give me like, I'm looking for lifetime income.
I don't ever wanna run out of money. I don't wanna be in a huge downdraft. Is this gonna work? Yeah.
That's gonna work like that. Yeah. And and again, then the good advisers know how to do that. They always do.
Yeah. I mean you talked about it's asking the questions as well being curious and even getting them to tell you the stories. Right? It's that exchange.
Sometimes clients don't know what they're worried they're concerned right but they're not sure how to articulate that. So I do think it's the job of an advisor who's doing if their retirement planning practice, you've got to know how do I identify this. Again, historically, insurance producers have been phenomenal at that. They're phenomenal profilers.
Right? They understand that. They're happy to talk about difficult topics. Right? Traditional advisors really don't like those topics.
They'd rather talk numbers. But as they move to this retirement income practice or retirement planning practice, you've got to know how to get this out of your clients so that you can really help them. Otherwise, you're not really getting under the surface.
Yeah, absolutely.
Now, I'm going to switch a little bit for you on we've talked about the healthcare side of this, and as a part of that, it's cognitive decline. Yeah. It's a sensitive topic. It's hard to talk about Yeah.
But it's important. So, how do you kind of broach that topic?
I mean, again, it's so interesting. Cognitive decline, I think, ranks right below death as a topic that advisors don't want to talk about. Right? Yeah.
But you have to because clients are thinking about it. Right? If they're seventy plus, they're thinking about it. Whether they think it's twenty, thirty years away or not, it's something they have to consider.
So I and I think there's a real hard reality to it. I I'm not elect I'm not gonna sit here and talk like a gerontologist about how do you talk to clients about that. I mean, just understanding again, but I do think a good idea is talking about their parents. Right?
Talking about their family history. That can uncover some of this. But the real, nuts and bolts of this is you want to act on the issues that cognitive decline can impact.
Right.
Health care proxies, POAs, right? Social security. Like, that's the issue to me. When I think about this topic, it's yeah. You could talk about it, but it's really about if your client is fully there, and they might be fully there till they're ninety. Right?
Right.
Some are not. Like you want to make sure you've done these things. So if you're doing retirement planning, by default, you will move to estate planning. Yeah. Just will. It's part of the progression, right?
Yeah.
And I've had personal experience where somebody was not deemed there anymore, right? Okay. And they were like, you can't do this. She can't sign that.
And we're like, what you talking about? And we're like, well, we'll sign. Your POA doesn't work. You've got to get on that early when they're fully aware.
You know as their adviser, they were fully informed, fully aware, and these are their wishes. Right. Not waiting ten years when all of a sudden it's, well, this is what they told me they wanted.
That doesn't it doesn't matter. I can tell you that. And so I think it's a it's a difficult topic. And I don't if it's so much talking about it, but it's planning for it.
Maybe you'll never need it. But plan for it. Think about it as part of that retirement planning, moving to estate planning. Those are really critical things.
Yeah. Know, I was having a conversation recently with someone in the family around the notion that it's actually easier to have these conversations when you're not in the moment, when you're not in a period of crisis because it you don't have that pressure around So that can be a timing.
And again, depends on how how do FA's run their practice, right, how advisors run their practice, but if if you're talking to folks on a regular basis, well, you you just bring it up in the conversation. Not, you know, cognitive decline, but just let's start talking about it. Like, what are you thinking? What are your thoughts? What are your wishes? Right? Yeah.
Whether you have a lot of money or not that much money, it's what are your wishes? And yet sometimes kids can't even bring that stuff up. So an adviser is an adviser. Right? They're they're kind of outside of the emotional circle to some degree. It should be a little easier.
Right, to do that as long as you're confident that you know I'm doing this for a purpose, for you, right, and we need to have this conversation. And you could do it young, you could do it when they're sixty, right? I mean, the sooner the better because you know they're fully able to make these decisions and they can explain it to their children or their heirs too. That's a big part of that. That's why you want this done because of that factor.
Right. Yeah, that is important and you talk about it being a part of an advisor's practice, you know, but given some of these things that are really topical right now, how does it change the advisor's role? And how do how should they be think potentially thinking about it differently?
Yeah. Mean, it does change your role. Right? Yeah. Go back to our other example. Twenty years ago, and again, I was thinking when I think of advisor, I'm thinking of those who've been in the business a while.
If you're a newer advisor and you're working on with younger clients, this is not a factor. Right? But those who've gone through this process with their clients, twenty, thirty years ago, they were only talking about asset allocation. They were talking about models and portfolios and then it became risk management.
Right? You've got to shift and your role shifts, right, where it becomes less about the numbers. You wanna make sure these clients wanna know, am I going to have what I need? Right?
So that's critical. But if you've done the planning, then your role kind of shifts to helping them get ready for uncertainty. Right? Numbers are certain.
When they were working and they were doing their four zero k, like, knew. Right. Now you've got this this horizon that they don't know. Right.
So your job is to say, look, we don't know, but let's do the plan. Let's stick with planning.
Let's focus on income.
Right? Let's focus on making sure you have that. I think that's your role then is to help them not just with the financials, the really intellectual side, but the emotional aspect. And it's it's a lot.
It's a lot. Oh, absolutely. So, John, if there was one idea that advisors could take away from this research, what would it be?
Yeah. I think it's very simple. Retirement planning is more than market ups and downs and short term volatility. Right?
I think that's what people have always felt it's been, but it's really about preparing for lifetime income needs. Right? What is ahead of you In this space? So, again, there's the two sides.
Yes. That still matters. Right? Asset allocation, risk, it still matters, But it's so much more than that.
Right? So, again, we talked about shifting to some of the emotional sides of this.
But really getting people prepared to understand that there's uncertainty. Right? And to be thinking about, okay, we don't know what's gonna happen, but let's take our best guess. Right? Let's be prepared for whatever we can do and bring ideas and bring solutions to the table. Right? This is why I think annuities have so much runway to go because it is a solution to a very real concern, which is I need to make sure I have some level of cash flow.
Right.
Right? Some level. You have Social Security. Great. Pensions, but those will become fewer and fewer, right, as years go on.
Oh, yeah.
So where else can you go? And you have something. And so I think advisors see that like, wow, I can actually solve a problem or at least go a long way towards solving that problem by using these income features inside annuities today.
Yeah. Excellent. And in closing, I'm curious about how would you describe what success looks like?
Yeah. I think, for clients, I think it's about are they confident, right, and not concerned anymore, right? That they're confident in what they're doing, they're confident in their in their approach and the plan that they've laid laid out, and they're not confused by this stuff anymore. I think for advisors, it's are they equipped, Right?
Do they feel equipped to do this and not hesitant? Right? That's what gets in the way of a lot of this. If they're it's just like anybody else.
If they don't understand something, they're just not gonna go there. Right? And and so if they feel confident and equipped and they can present these things, their clients will be better. And then finally, I think it's just knowing that if lifetime income benefits, you know, however you wanna phrase it, become a core part of retirement planning.
And advisers really see this as a tool to help clients deal with the uncertainty, to make sure they have that floor of income. Right. And it's really baked into the plans going forward. That's big ask.
Right? Yeah. But I think the industry is up for it. I think they can do it.
And I think the advisors and their customers are counting on us to do that.
Yeah, agreed. I mean, the opportunity to help bring more security for folks as they retire is immense, right? And we do have that responsibility as an industry to help both advisers and, consumers do what you just described. So yeah. Well, thank you for joining us today. Been a great conversation.
Really wanna thank all of you for joining us today for this important discussion.
To explore more insights like these, visit limrafinpro.com and download the full research supporting today's discussion.
