Why simplicity matters in annuity conversations

Key takeaways:

• Complexity can delay annuity decisions.
• Simpler product explanations help improve confidence.
• Clients respond better to clear, income-focused messaging.
• Reducing complexity can support decision making.

For many clients, understanding annuities isn’t just a product question — it’s a clarity question.

Even financially savvy clients can find these products difficult to navigate, especially when conversations move quickly into features, optional riders and technical details. In many cases, hesitation may stem less from skepticism about annuities themselves and more from uncertainty about how they work and where they fit into a retirement strategy.

Researchers Gregory Samanez-Larkin of Duke University and Craig R. Fox of UCLA Anderson School of Management and Duke University produced an Athene-commissioned survey and white paper to explore how different generations view annuities and financial topics. While survey respondents demonstrated above-average financial literacy, many still reported only a moderate understanding of annuities.¹ In fact, only about two out of five said they understood annuities fairly well or better.¹

That may reveal an important challenge for the industry: financial literacy alone may not be enough to make confident decisions about retirement savings and income solutions.

The biggest barrier to annuities may not be skepticism — it may be confusion.

Research findings also challenge another common industry assumption — younger consumers are largely uninterested in annuities. However, millennials and Gen X reported higher levels of interest in annuities than baby boomers, suggesting annuity adoption may be driven less by product aversion and more by other reasons.

What research reveals about evaluating retirement solutions: the leading predictor of interest in annuities is not product aversion, but product understanding.

As retirement planning grows more complex in an age of longer life expectancies and increased market volatility, the ability, the ability to help simplify decision-making for clients could become an increasingly important differentiator.

How complexity creates decision paralysis

For many clients, evaluating annuities can feel overwhelming.

They’re often faced with:

• Multiple product types
• Optional riders
• Complex payout structures

From terminology to varying levels of market exposure and protection, complexity can cause some people to shy away from annuities. And more choice doesn’t always help. In many cases, it has the opposite effect.

In behavioral science, too many options and trade-offs can lead to what’s known as choice overload, making decisions feel more stressful and making it more difficult for clients to determine which options best fit their individual needs and objectives.

When clients feel overloaded, they sometimes don’t make a better decision — they can delay making one at all.

Simplicity can play an important role

The research shows a clear pattern: simpler products may generate more interest.

Across generations, clients expressed stronger interest in:

• Immediate annuities
• Fixed annuities

Interest declined when annuity conversations became too complex, for instance explaining variable annuities. Using clear product language that helps clients determine what option works best for their specific needs is key.

More information about annuities is not always better. More understandable information is better.

The takeaway is straightforward. The easier a product is to understand, the easier it may be for clients to evaluate their options.

For financial professionals, part of simplifying explanations may include framing conversations around the outcomes clients are trying to achieve so product features and trade-offs are more relevant to their needs and goals.

  

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Three strategies to help simplify annuity conversations

The research identified three communication approaches financial professionals can use to help clients evaluate annuities with more clarity and confidence.

1. Start with the core benefit

When introducing annuities, simplicity matters. You can often make conversations easier to follow by leading with the primary benefit and how it aligns with a client’s needs and goals, rather than starting with product details.

Example:

“This annuity guarantees a monthly income for life.”

Once clients understand the core benefit, additional features may be easier to understand within the context of the annuity’s purpose. This approach can help shift conversations from technical features toward how the annuity may support a client’s retirement needs and goals.

2. Focus on the most relevant options

Presenting too many options at once can create friction.

Instead, a more focused approach may be more helpful. For example:

1. Introduce the products most relevant to the client’s needs and goals.
2. Show how each one may help address the client’s specific objective.
3. Discuss additional options when they’re relevant to the client’s evaluation.

Too many options presented at once can make complicated financial decisions feel more challenging. Helping clients focus on the options most relevant to their needs and goals can make trade-offs easier to evaluate.

That doesn’t mean oversimplifying tradeoffs. It means creating a clearer path forward for productive conversations.

3. Emphasize what matters most

Clients often simplify decisions by focusing on a few key attributes.

Financial professionals can support that process by first focusing on the outcomes clients value most, such as:

• Lifetime income
• Downside protection
• Growth potential
• Flexibility

The research also suggests these priorities may be different across generations.

Tailoring conversations around those differing priorities can help make annuity decisions more personally relevant and easier for clients to navigate.

Technical details can follow once the foundational benefits, tradeoffs and objectives are clear.

Key takeaways for financial professionals

Clients value simplicity, clarity and confidence in financial decision-making more than ever. That creates an important opportunity for financial professionals.

Financial professionals who can help simplify decisions without oversimplifying tradeoffs may be better positioned to build trust across generations and help more clients move from uncertainty to confident decision-making.

For deeper insights into how product complexity, generational preferences and behavioral biases can influence annuity decisions — and for more practical strategies you can apply — download our latest white paper, Solving the Annuity Puzzle for New Generations of Consumers.

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