Guaranteed income's real product is permission to spend the rest

Clients almost never ask an advisor for an annuity by name; they ask whether they can afford the trip, the gift to a child, or the decision to stop checking the account balance every time the market drops, and the research keeps pointing at an income floor as one of the more direct routes to a yes. BlackRock's 2024 retirement study, "Been There, Valued That," found that 53% of annuity owners surveyed said owning one made them more comfortable spending non-guaranteed assets on things they want or need, while 84% said guaranteed income left them feeling less vulnerable to financial fraud or poor investment decisions as they age.

The 53% is the figure with a business inside it. Comfort describes how a client feels on a Tuesday; spending is an observable change in the rest of the portfolio, and it is the change a fee-based advisory firm is paid to produce. A household whose essentials are covered by a contract can leave the growth assets alone through a drawdown instead of converting them to cash at the wrong moment, which is exactly the argument an annuity has to make inside a firm whose revenue comes from the assets the annuity would absorb; every dollar into an income contract leaves the fee base, and a firm that wants the guaranteed-income business anyway has to get the client to ask for it.

LIMRA's "Path to Purchase" research on deferred annuity buyers asks a related question—what separates the client who folds an annuity into the plan from the one who stays anxious and never does—and the advisors InvestmentNews spoke with say the answer has less to do with the contract than with who starts the conversation. Jesse VanValin, a senior vice president and private wealth advisor at Procyon, does not begin with a product: he backs out the investment values, puts a number on the income the client says they want, costs the monthly lifestyle that income buys, and subtracts whatever Social Security or a pension already covers. Only then does he walk through the ways to fill the gap, with a guaranteed income annuity sitting on the same shelf as a bond ladder and a cash bucket, and in his telling the client who finds the gap tends to choose the tool, so the recommendation stops feeling like a pitch.

That sequencing looks like technique and behaves like infrastructure. A gap calculation requires the firm to hold the household's monthly income and spending in one place, the client record in its plainest form, and as this publication has argued, the platform war has moved from software to the client record and the cash spread, so the firm that runs the arithmetic is the firm that frames the annuity decision, whichever contract the client eventually signs. The guaranteed-income winners will likely be the planners, bank channels, and larger RIAs that already hold the client's numbers; a wider annuity shelf is a weak substitute. It also supplies a partial answer to the question LIMRA set out to study: the anxious group may stay anxious for the mundane reason that no one ever ran the numbers with them.

Troy Randall, who leads insured solutions at RBC Wealth Management – U.S., reaches the same decision through longevity rather than accumulation. Certain annuities, in his description, are designed to limit or avoid losses while paying out for a set number of years or for life, and the frame lands because it echoes something familiar: a parent's pension. "They go from paycheck to what I call mycheck," he told InvestmentNews. Clients who have created an income floor through annuity income protections, he said, add to their financial confidence and become more engaged in the rest of their wealth planning once they are relieved of having to track where the income is coming from.

The pension echo is a borrowed analogy, and an effective one: the client never collected that pension, a parent did. It remains a strong anchor for households that watched retirement income arrive without market risk, and it carries a retention argument sturdier than the volatility story, because a client whose income is settled has attention left for tax, estate, and everything else in the plan. But the frame sells safety, and 53% is the benefit it leaves on the table; the households that loosen up on the trip and the down-payment gift are the ones getting the annuity's economics right.

Whether an income floor also makes a household harder to move is an open question for the bank channels, and RBC is a fair test of it: PWD's records count 16 RBC items this year as of Sept. 20, among them three team moves in the first ten days of September and an executive change in late August, and that same month brought our report on LPL's employee channel winning advisors away from the wirehouses, RBC among them. An annuity bought inside a bank relationship is a commitment to a plan rather than to one broker—that, at least, is how the retention logic runs—and the research in hand does not test it.

That fight is already further along higher up the retirement system, where the defaults keep winning the first allocation, as we have argued in this space, and an income solution written into a plan's default path reaches a household with no conversation at all. The wealth channel works the other way: every income floor here is an opt-in decision made with an advisor, which is why the client's own discovery of the gap carries so much weight in VanValin's retelling.

An advisor can run a narrow test this quarter: take a client who can afford the trip and has not taken it, cost the income that would cover their essentials, subtract Social Security and any pension, and see whether the hesitation was the market or the missing floor. Then watch which firms do that arithmetic first, and whether the next round of guaranteed-income research measures what households actually spend once their essentials are covered, rather than how they say they feel about the coverage.