In a report released late last month, the Insured Retirement Institute (IRI) announced that seven out of ten investors surveyed admitted they seldom or never read the prospectuses that accompany variable annuities. At 100 to 300 pages long, that doesn't come as a surprise.
A long, difficult-to-understand prospectus is a plus for sellers. As evidenced by the IRI report, it means most investors won't read it. (According to the IRI, only 5 percent of surveyed investors said they always read their prospectuses.) And, even if they do read it, they're unlikely to discuss the product with their advisers.
More investors than ever before (94 percent compared to 86 percent last year) are saying they would like to receive a shorter, printed summary prospectus instead of a full-length prospectus.
"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."