Say that this week’s stock market volatility stirs up consumer desire to put money in financial products with guarantees. Say that fixed annuities come to mind. Who is likely to get that sale or that inquiry? Would it be a life insurance agent, a rep at the local bank or maybe the family stockbroker/financial advisor?
Based on a Cogent Reports study by Market Strategies International, it just might be the agent.
“Data suggest that the growth opportunity for annuity providers is much more robust with the insurance agent population,” noted Linda York in a recent blog for the Livonia, Mich., firm. She leads the Wealth Management Syndicated Research & Consulting practice at the company.
Financial advisors also increasingly offer fixed annuities for sale. But “winning over financial advisors as a whole will be a formidable challenge,” York predicted.
Fixed annuity study
The comment comes in reference to some research that Market Strategies did in its Fixed Annuity Brandscape study.
Released in September, the study found that 40 percent of surveyed agents are likely to sell fixed annuities in the next six months compared to just 10 percent of financial advisors.
This finding tracks with historical patterns, since annuity specialists in the life agent population have traditionally produced the large majority of fixed annuity sales. They not only sell the products but also do a lot of related client education, seminars and promotions, right alongside the client education and promotional activities of fixed annuity carriers.
What about sales of fixed index annuities (FIAs)? According to Brandscape’s numbers, insurance agents will be in the lead there as well. The researchers found that 35 percent of surveyed insurance agents are likely to sell FIAs in the next six months, compared to just 6 percent of financial advisors.
Just 6 percent?
That 6 percent prediction regarding advisor-sold FIAs has clenched-teeth potential for carriers using that channel. That’s because the finding arrives at a time when various carriers are already ramping up for anticipated FIA sales in the broker/dealer channel where financial advisors work.
Just this week, for instance, Allianz Life unveiled a new FIA that it designed for sale on the recently updated “indexed annuity platform” at Wells Fargo Advisors, the brokerage unit of Wells Fargo & Co.
The product, Essential Income 7 and its Essential Income Benefit, is a variation of another FIA that the company debuted last year, the Allianz Core Income 7 Annuity with its Core Income Benefit rider. The Core product is the first FIA that Allianz designed to appeal to the broker/dealer community.
This is not a one-off trend. A few weeks ago, Western & Southern Financial Group rolled out a new FIA, Indextra, for distribution through its W&S Financial Group Distributors. The distributor markets Western & Southern products through a national network of broker/dealers, financial advisors, independent agents and financial institutions.
In August, Forethought Life, a subsidiary of Global Atlantic, launched two new FIAs — ForeAccumulation and ForeIncome — exclusively for broker/dealer distribution.
Earlier this year, Nationwide brought out a new FIA, New Heights, for distribution through multiple channels, including wirehouses as well as independent marketing organizations, Nationwide agents, independent distributors and banks.
Several other carriers have unveiled similar initiatives, some starting a year or more ago. (It bears noting that these products are the fixed form of indexed annuities, and not registered indexed annuities.)
All that activity seems to suggest carriers are getting ready to take on more advisor-sold FIA business. This is not unlike what happened back in the early 1990s when variable annuity carriers began rolling out product after product, even though variable annuity sales were then paltry at best. The carriers were getting ready “for the day when.”
Waiting for the spike
The Brandscape numbers suggest the anticipated spike in FIA sales might take some time, at least at several carriers. That’s because, even with more products now approved for sale in the broker/dealer channel, a large majority (79 percent) of the surveyed financial advisors said it is unlikely that they will sell FIAs in the next six months.
The researchers did ask why. The advisor answers reveal negative views around the nature of the products. For instance, one-third of those who do not expect to sell FIAs said their main reason is that these types of product limit growth potential.
Thirty-two percent blamed the current low interest rate environment which has limited product benefits. And 29 percent said FIAs are too complex for their clients to understand.
York pointed out that a sizeable number (40 percent) of insurance agents also expect they won’t sell FIAs in the next six months. That’s 5 percent more than agents who predict they will sell FIAs.
What’s the reason on the agent side of the fence? Thirty-three percent said their main reason is that their broker/dealer does not allow them to sell FIAs. Meanwhile, 29 percent of agents said FIAs are too complex for clients to understand, and 27 percent said they don’t have sufficient knowledge about how FIAs work.
The agents among the “non-sellers” tend to be significantly newer to their roles than the agent population overall, York noted, positing that perhaps these agents have yet to expand beyond selling traditional life insurance. As for advisor “non-sellers,” they tend to reflect the broader financial advisor population in both age and tenure, she said.
Her assessment is that providers of fixed annuities and FIAs “face an easier road in winning over new agents with a focused effort on education than they do among advisors whose perception of these products will be challenging to change.”
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