Following recent changes and suspensions by some insurers, managing general agencies are concerned that we may be seeing the end of guaranteed withdrawal benefits products, or the continued shrinking of benefits and market players.Jim Virtue, president and CEO of PPI Solutions said it is clear that in the current economic environment, insurers cannot offer this product and stay within their risk tolerance and profit targets. “I believe that, at least for now, we are going to see an end of this product category, or at least it is going to have way fewer players with products that do not offer the same benefit levels as when the products first came out.”
He adds that those who purchased these products early on should hang onto them for the long run. “We now know what great consumer value they have.”
Bruce Hammond, chairman and CEO of Performins Canada says he understands that economic and regulatory pressures are making it difficult for insurers to offer this product. At the same time, he worries what will happen to this important market. “For an individual approaching retirement, this product is fantastic – no downside, actually guaranteed growth with the chance to see big returns if the markets takeoff.”
Mr. Hammond is hopeful that the remaining insurers in this market will keep offering GWBs. “We have received assurances from some of the bigger companies that they are staying in the market – hopefully they do.”
Mr. Hammond adds that his belief is that the GWB market will continue, but that the products in the future won’t be as lucrative for clients as they have been in the past. However, his advice to advisors is to keep selling these products.
“Returns everywhere are down. GWB products still have a place in certain of your clients’ portfolios – let’s not write them off…A 60-year-old with five years to retirement cannot afford to lose retirement income and needs protection – this product still offers that.”
Nick Simone, president of Qualified Financial Services, says his firm will continue to offer a GMWB course for advisors, which it introduced at the end of last year. He adds that QFS knew changes were coming to these products, but still sees opportunity in this market. “We are certain that the GMWB will be around for years. We are not certain on the format and structure.”
He adds that his message to advisors is to sell the product now while they can take advantage of these products in their current structure.
John Lutrin, executive vice-president at Hub Financial, says he is not surprised that carriers are taking a careful look at these products or exiting the market altogether, especially since some of these products were designed and launched at a time when insurers were jumping on the bandwagon to capture market share.
His message for advisors is to look at each product in the context of what is suitable for the client under their circumstances. “Consider the history of the product since launch – what did it look like at launch? What does it look like now? How many versions and how many ‘haircuts’ have occurred? And, lastly, use instinctive judgment – if a product looks too good to be true, it probably is – at least for the long term.”