Less is more, at least when it comes to consumers’ interest in reading prospectus information about variable annuities (VA).
Cathy Weatherford
About six-in-10 people (59%) surveyed by the Insured Retirement Institute (IRI) would be more apt to discuss a VA with their financial advisor if they received a short summary prospectus written in clear, everyday language.
Nearly all consumers (94%) would prefer to receive a shorter, printed summary prospectus, instead of a full prospectus if details were available online or upon request.
Last year, a similar survey found 86% support for the summary prospectus.
In addition, if provided with a short summary prospectus written in clear, everyday language, 59% would be more likely to discuss the product with their advisors.
“Consumers are looking for clear and concise information when making investment decisions, particularly when it comes to strategies that may be a bit more intricate,” said IRI President and CEO Cathy Weatherford. “Our research shows that the vast majority of investors completely forgo reading their full prospectus, because of its length or other consumer preferences. At a time when consumer reliance on insured retirement strategies is growing, we need to ensure that investors have access to the kind of product information they are seeking, in a format that reflects their preferences.”
While seven out of ten consumers seldom or never read their prospectus, only 5% report that they always read the current prospectus and just 17% read it most of the time.
Nearly nine out of ten (87%) of annuity contract owners rarely or never refer to their prospectuses for questions about their annuities after purchase. Only a handful (13%) have referred to their prospectuses after purchasing a variable annuity.
The most often-read parts of a VA prospectus are the summary/highlights section (98%) and the information of fees and expenses (97%). Deductions from accounts in the forms of sales loads and commissions are read by 88% of respondents.
Only 58% of VA owners look at the descriptions of contract benefits, although 69% will read the section focused on death benefits.
Financial advisors would get more VA action if prospectus was briefer via IFAwebnews.com .
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