Annuity adoption still trails client demand as cost and control objections persist

Annuity contracts have grown simpler, their fee disclosures clearer, and the buying process easier through advisory platforms. Adoption among financial advisors still trails what clients say they want, and the executives and researchers who study that gap point to the practice itself as the binding constraint.

Demand is not the missing ingredient. The Alliance for Lifetime Income estimates that more than 4.1 million Americans will turn 65 each year through 2027, roughly 11,200 a day, and LIMRA research released in August 2026 found that about seven in 10 pre-retirees prefer retirement income with a protected component — Social Security, a pension or an annuity — to relying only on portfolio withdrawals. LIMRA identified perceived cost and a reluctance to give up control of assets as the biggest psychological barriers to buying an annuity, and those are the two objections advisors hear across the desk. The coverage does not put a number on the distance between the stated preference and the sale.

Michael Kazanjian, who heads insurance overlays at FIDx, a Berwyn, Pennsylvania-based annuity technology firm, treats the two complaints as a single exchange. The client hands the insurer only the slice of savings meant to produce steady income, gives up easy access to that money and receives in return a promise of payments for life. On cost, he relays a line he attributes to a senior leader he used to work with: fees are only an issue in the absence of value. Every product has a cost; what differs is the value. The value in this case, he said, is the ability to spend in retirement without underspending out of fear of outliving the money.

He argues that benefit escapes the sleeve it sits in. "Once one account is doing the income job, the advisor has more flexibility with everything else," Kazanjian said. "It's not only a restriction on one sleeve. It frees up mobility everywhere else."

Michael Finke, professor of wealth management at The American College of Financial Services, comes at the control objection from the product side, steering clients worried about tying up savings toward annuities with a living benefit — a feature that guarantees a minimum withdrawal amount for life while leaving the contract value accessible after purchase. Current payout rates, in his reading, compare well with building income from bonds to an average life expectancy, which he puts at about 87 for a male financial planning client and about 89 for a female client. "The benefit of the annuity over bonds is that the client can spend as if they are going to live to an average longevity rather than spreading savings out," he said.

What makes the two men worth reading together is the premise underneath both answers. The product side has already moved: contracts are simpler, disclosure is better, platforms are friendlier to advisory accounts, and the adoption number has not followed. If LIMRA is right that the sticking points are psychological, further product work has diminishing returns and the practice absorbs the rest of the weight. That is an uncomfortable reading for anyone still waiting on a better contract.

Put those answers side by side and the fee objection stops behaving like a pricing problem. An advisor who grades a living-benefit rider against a bond fund's expense ratio is measuring it against a yardstick the client never actually faces; the comparison Finke draws is with the capital a bond ladder would need to produce the same income to ages 87 and 89, and on his account the payout rates hold up well there. Cost is not the operative number in that frame — value is, which is Kazanjian's point arriving from a different direction.

Control has a similarly practical answer in the living benefit. A client who raises it is asking, in effect, whether the decision can be undone later; a contract whose value stays accessible after purchase answers that question in a way a locked-up premium does not. It is the version of the promise Finke puts in front of the clients who bring the objection up.

A fee-based practice carries a mechanical headwind into either conversation. A premium handed to an insurer leaves the asset base the firm bills on, which likely turns a referral into a revenue decision as much as a planning one. The trade Kazanjian describes — one sleeve given up so the rest can be spent without hoarding — is a harder case to make when the practice's own economics sit on the other side of the ledger. That is not an argument against the product. It is an argument for deciding, deliberately, who owns the conversation.

That decision has a calendar attached. An annuity sold and then left alone keeps both objections alive, because the client never gets an occasion to see what the fee bought or to reconsider the control question with a year of retirement spending behind them. The product work is largely finished. Whoever schedules the first annual review — the advisor, the platform, or nobody in particular — is where the adoption gap actually gets closed.