There's no doubt that, in recent years, annuities have become a sensitive subject for many advisors: concerns about annuity expenses, news of inappropriate practices with seniors, complicated policies with too many confusing riders to choose from, the endless jargon… it seems like the list just goes on and on. All of these issues have some advisors on the defensive when it comes to recommending annuities as a viable investment option for their clients.

So why should advisors consider recommending variable annuities when providing financial advice?

Tax-deferred growth — This enables a client's investment to have the potential to grow faster than in a taxable investment because any gains that would have been lost to taxes remain in the client's annuity, generating additional potential earnings. Note that any withdrawals are taxed as ordinary income, and withdrawals prior to age 59 1/2 may be subject to an additional penalty.

Guaranteed death benefit — With a standard annuity, if a client passes away while accumulating money in his/her annuity, the heirs of their estate will receive at least the amount he/she originally invested. Guarantees are based on the claims paying ability of the insurer.

Investment convenience and flexibility — When clients invest in a variable annuity, they have several investment options all within the convenience of one tax-deferred vehicle. Transfers between these options (and even between fund families) are free of any current tax consequences.

Unlimited contributions — Unlike 401(k)s, IRAs or private pension plans, an annuity generally does not limit the amount a client can invest, so you have an excellent opportunity to invest more of your client's money on a tax-deferred basis. And believe me, they'll appreciate it.

Income for life — When they're ready, clients can turn annuities into a regular stream of income that is guaranteed to last as long as they live, making an annuity a source of financial security for your client and their families.

Some of you might be wondering, "Why all the fuss about annuities? They don't really affect my business." According to research conducted by Spectrum Group in 2005, 60 percent of advisors, either frequently or occasionally, have a need for annuity products among their client base. Variable annuities are especially important for advisors with clients who have less than $500,000 of investable assets.

Hector May is president of Executive Compensation Planners and a fee-only advisor who knows the value of a variable annuity, despite the negative press currently surrounding them in the industry.

"There are some big misconceptions out there," says May. "Annuities have their advantages, including a death benefit and the ability to have multiple sub-accounts."
One key factor many advisors also need to consider is that if they aren't currently reviewing their clients' variable annuities as part of their practices, it's very likely that there's another advisor waiting in the wings to do just that. According to Spectrum Group, 25 percent of advisors are currently turning away clients interested in annuities. This can potentially open the door for another advisor to take control of your client's assets on a full-time basis by getting his foot in the door with the annuity evaluation. Why would a client go back and forth between advisors when they can receive guidance from just one advisor who can handle all their financial needs? That advisor could be you.

Another recent trend among affluent clients is their openness toward no-load products and advisors who offer them. Clients are often more content in their no-load investment decisions because they know the advisor isn't influenced by compensation from sources other than the advisory fee the client is paying. This gives the client added confidence that the advisor truly has their best interests in mind. For fee-only and fee-based advisors who have been bypassing annuity management, adding this service means additional compensation and assets under management. And with the baby boomers headed into retirement, there's a good chance the need for annuities will continue to increase.

Today's variable annuities offer clients and their families affordable opportunities that can help provide security for life and beyond, which is something that other investment options simply can't guarantee. There is also a potential for growth and flexibility, making them an attractive investment option for clients. Advisors must stay on top of client demands and expectations if they expect to be viewed as influential leaders in this industry.