Planners turning to annuities and outcome funds
Wednesday, 23 March 2016 1:09pm

Financial planners are increasingly turning away from cash and term deposits for their retirement clients while annuities and outcome-orientated funds are becoming more popular destinations for new client money instead, according to the latest retirement planner report from Investment Trends.

Over the past 12 months, financial planners placed only 16% of their new retiree client flows into cash and term deposits, according to the researcher, down from 22% in its last study.

Relative to their current usage, two products stand out for future growth potential among the older client segments: annuities and goals/outcomes-based funds.

"To continue being seen as adding value to their pre-retiree and retiree clients, especially in this high volatility and low interest rate environment, financial planners are reducing their flows into safe haven investments such as cash and term deposits in favour of more sophisticated products," said Investment Trends head of research for wealth management Recep Peker.

"Annuities, diversified funds and income funds will continue to be the winners as planners seek higher yielding, diversified investments."

Two in five planners (41%) say they recommended annuities in the 12 months to December 2015, up from 38% in 2014 and 32% in 2013. Investment Trends said annuities' rise in popularity is due in no small part to Challenger's efforts in raising awareness and education of the product.

"Planners are becoming proficient in recommending annuities, with more finding them easy to understand and use," said Peker. "Those who explain annuities to clients typically spend only 14 minutes doing so, versus 17 minutes taken to explain managed funds."

"Client awareness of the Challenger Annuities brand has also contributed significantly to planners' ability to recommend annuities, helping to grow the market."

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