‘Massive opportunity’ for indexed annuity sales growth, panelist says

DALLAS – The soaring star of annuity sales – registered indexed-linked annuities – will continue selling well despite economic uncertainty, a panel agreed today.

And Sarah Garrity of BlackRock knows where a "massive opportunity" lies.

"What we're not talking enough about is the massive amount of money that's sitting in money markets," said Garrity, director of national sales for the annuity distribution team within BlackRock’s Financial Institutions Group. "When I looked at it, it was $20 trillion that is currently sitting in money markets. To put that in perspective, that's the GDP of all 50 states combined."

The panel focused on "product design and meaningful innovation" during the second day of sessions at the Annuity Distribution Summit hosted by the National Association for Fixed Annuities.

RILAs are also known as buffered or structured annuities and date to 2010. Sales are expected to hit $60 billion in 2024, LIMRA officials have said, a 25% increase over 2023.

A RILA is a long-term, tax-deferred insurance contract designed to help people save for retirement. RILAs work by tying the performance of the contract to one or more stock market indexes and offering a level of protection from market downturns.

"Two demographics that we should all be thinking about and going after," Garrity said. "First, high-net-worth individuals and that emerging younger demographic. And what do those two demographics have in common? More conservative."

RILAs, along with buffered exchange-traded funds, can help both those who need protection over big returns and those accumulation-focused clients not used to steady 7% annual returns, Garrity explained.

"We talk in the world a lot about the bulls and the bears, but what we don't talk about are the chickens," she added. "There's a lot of chickens out there who aren't quite sure what to do. They want growth, they want a little bit of protection, and that's something that we can offer."

'I'll take it'

Richard Macari is head of insurance index solutions at Nasdaq. He shared a conversation with a 40-year-old friend who asked if a RILA was right for him.

"It was the first time that I really felt someone from my generation was really looking at annuities," Macari said. "He was like, 'I like the upside potential [and] a little bit of downside risk. I'll take it.' And he knew so much about it. I was really interested."

One advantage of RILAs is the ease of explanation. For example, a typical RILA might return a maximum gain of 8%, and limit any losses to -2%, depending on the chosen index performance.

Some products seen as complex

But other annuities are more complex, which has become the leading criticism of the products. Dan Acker, president of SILAC and moderator for the session, noted the average age of a RILA purchaser is 62, while it is 66 for a fixed-indexed annuity.

Expanding that age band is hard if the products are viewed as difficult to understand.

"Individuals want choice, but they want simplicity," Garrity said. "They're looking for simplicity. They're looking for transparency. And they want to understand how it works. So if we want to expand that age down, I think especially for accumulation, it's about having a very simple and straightforward product."

Annuities are not "complex," Garrity insisted. They're "sophisticated."

Transparency can at least give consumers confidence in the indexed products, said Phil Brzenk, managing director, S&P Dow Jones Indices.

S&P allows anyone to download all the methodology and math that goes into their indices, he noted.

"I know a lot of people don't necessarily want to go that deep, but I think that gives a breadth of confidence in what we're doing," he explained. "We're not trying to hide anything from the marketplace. So I think that's quite important."

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