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Who Buys Annuities, and Who Is Likely to Buy Them? Targeting Annuity Buyers in the Post-Recession Marketplace June 2012

Kehrer Saltzman Report Series

Strategic Business Insights' Consumer Financial Decisions (CFD) group, in collaboration with Kehrer Saltzman & Associates, is pleased to announce the availability of a new study designed to help annuity marketers identify annuity-disposed customers and target them for marketing and sales campaigns. Who Buys Annuities, and Who Is Likely to Buy Them? offers important and useful insight for annuity manufacturers, distributors, and marketing firms as they seek to reach consumers for whom fixed and variable annuities are an attractive solution for reaching financial goals in a difficult, post-recession environment.

This report is the second in a series of executive reports that focus on the financial-services industry. Read more about the series

About This Report

Using CFD's MacroMonitor database, this study examines the demographic, attitude, and financial-product use characteristics of US households that reported purchasing a fixed or variable annuity in the past two years, or who indicate they are likely to buy an annuity in the next twelve months.

The analysis reveals profiles of Annuity Buyers and Likely Buyers, including attitudes and preferences toward financial institutions, and views toward financial advisors. Subtle variations are explored in the characteristics of Fixed Annuity Buyers, Likely Fixed Annuity Buyers, Variable Annuity Buyers, and Likely Variable Annuity Buyers. The study provides actionable insights about how to identify households that are receptive to annuity solutions, and how to engage with them.

Who Buys Annuities, and Who Is Likely to Buy Them also provides a profile of annuity-disposed households in terms of their banking preferences and the products and services they are likely to use with their primary financial institution.

Study results point to a significant interest in and/or orientation toward financial planning among annuity-disposed households. This trend surfaces repeatedly in questions that probe the preferences and attitudes of these consumers, and represents a significant strategic opportunity that should be recognized and exploited by annuity providers and their financial advisors.

Indeed, when asked about financial topics they would like to learn more about, Annuity Buyers and Likely Buyers overwhelmingly select a variety of financial planning and financial management issues, providing yet another opportunity for annuity providers and their marketing teams to craft messages that capture the attention and serve the needs of these households in the post-recession marketplace.

The Data Source

The MacroMonitor is the largest comprehensive retail financial-services and marketing database that has measured, analyzed, and interpreted consumer attitudes, behaviors, and motivations continuously since 1978. The 2010–11 MacroMonitor is a national sample survey of 4,374 households, with an oversample of 1,500 affluent households, reweighted to be representative of the US population. The Consumer Financial Decisions group of Strategic Business Insights, formerly part of SRI International, conducts this comprehensive survey every other year.

About the Authors

Paul Field has more than 35 years of experience in the insurance, banking, and investment industries, most recently as a Senior Vice President with SunTrust Banks, Inc. His experience includes strategy development, program design, product development, due diligence, marketing communications and marketing support. He is a senior associate of Kehrer Saltzman & Associates.

Dr. Kenneth Kehrer has been conducting research on annuity product design and distribution for over 30 years. His research and peer discussion groups have influenced a generation of annuity marketers. At Kenneth Kehrer Associates in the 1980s, he developed information services to monitor the product features and competitiveness of both fixed and variable annuities. In 1996, Dr. Kehrer was the co-author of the highly regarded Consumer Financial Decisions monograph Marketing Annuities, an earlier exploration of the MacroMonitor database to target annuity-disposed consumers. Dr. Kehrer has consulted for a wide range of product and service providers on annuity distribution, including 58 of the 60 largest US banks, most of the wire houses, and virtually all of the insurance companies that market annuities through financial advisors. In April 2012, Dr. Kehrer, Peter Bielan, and Steve Saltzman formed Kehrer Saltzman & Associates, where Dr. Kehrer now provides the research and consulting expertise that he formerly brought to Kehrer-LIMRA.

Steve Saltzman has pursued a 20-year career in the financial services industry in a variety of leadership positions with a focus on annuities, life insurance, and investment products, including executive positions with the Insurance Group of JP  Morgan Chase. He is a principal of Kehrer Saltzman & Associates.

Table of Contents

Executive Summary 4
Part I. Annuity Buyers and Likely Buyers 9
Key Demographic Characteristics 10
Age 10
Household Income 12
Education 13
Employment Status 14
Ethnic Background 14
Life Stage and "Generation" 15
Socio Economic Level and Marital Status 17
Key Financial Data 18
Total Financial Assets 18
Checking Account Balances 19
Savings Account Balances 20
Part II. Preferences and Attitudes of Annuity Buyers and Likely Buyers 20
Uses and Preferences for Financial Institutions 21
Primary Financial Institution — By Assets 22
Primary Financial Institution — By Activity 23
Preferred Primary Financial Institution 24
A Quick Comparison 26
Consumer Trust 27
Consumer Views toward Financial Advisors 27
Consumer Trust — Again 28
Opportunities for Advice 29
Appealing to Consumer Interests 30
List of Charts and Tables 32
MacroMonitor Survey Methodology 33
Survey Weighting Procedures 35

List of Charts and Tables

Figure 1. Distribution by Age 10
Figure 2. Total 2009 Household Income Before Taxes 12
Figure 3. Education 13
Figure 4. Employment Status 14
Figure 5. Ethnic Background 15
Figure 6. Life Stage 16
Figure 7. Generational Cohort 17
Figure 8. Socioeconomic Level and Marital Status 18
Figure 9. Total Financial Assets 18
Figure 10. Total Balances in Checking Accounts 19
Figure 11. Total Balances in Savings Accounts 20
Figure 12. Primary Financial Institution — By Assets 21
Figure 13. Primary Financial Institution — By Activity 23
Figure 14. Preferred Primary Financial Institution 25
Figure 15. Primary vs Preferred Financial Institution 26
Figure 16. Institutions Trusted "A Great Deal" 27
Figure 17. Primary Financial Advisor 28
Figure 18. Advisors Viewed "With a Great Deal of Trust" 29
Figure 19. Household Likely to Obtain Advice From 29
Figure 20. Financial Topics Consumers Would Like to Learn More About 31
Table 1. Distribution by Age 11
Table 2. Total 2009 Household Income Before Taxes 13
Table 3. Employment Status 14
Table 4. Ethnic Background 15
Table 5. Life Stage 16
Table 6. Total Financial Assets 19
Table 7. Primary Financial Institution — By Assets 22
Table 8. Primary Financial Institution — By Activity 24
Table 9. Preferred Primary Financial Institution 25