Panel: Advisors will warm to annuities, opening up big market

SALT LAKE CITY – The advisor's office is where annuity sellers have longed to find acceptance, only to be repeatedly disappointed.

That is most certainly going to change in a big way, a panel agreed during a Monday session at the LIMRA Life Insurance and Annuity Conference. It's all about the lure of guaranteed income, said Jeff Cusack, chief distribution officer with RetireOne, a fiduciary platform for fee-based insurance distribution.

"I would think there's an awful lot of RIAs that don't do anything with insurance today that will start with this and and get more comfortable with potentially expanding what they do with insurance," he said.

Cusack was part of the session titled, "Contingent Deferred Annuities: The Next Big Thing?" The panel generally settled on Yes, with some speakers more enthusiastic than others.

"I don't think this is next year, but 5,10, 15 years out, the CDAs are just another business model to deliver retirement income than we have today," said Cliff Merrill, chief distribution and product officer with Merit Life Group. "It's really about how that guarantee is delivered to the client."

The combination of regulators clamping down on annuity sales and baby boomers retiring by the thousands each day moved the industry to create fee-based products. To date, sales have been slow to catch on.

Low opinion of annuities

Traditionally, the registered investment advisory world held a low opinion of annuities and insurance products in general. But annuities can supplement Social Security to give clients monthly income until the day they die, a peace of mind that some advisors are recognizing.

Cusack told of a Massachusetts RIA firm with about $500 million in assets that embraced annuities in its retirement planning.

"They don't really have any other way of providing income guarantees for their clients," he explained. "So it's like a personal pension for the clients. And that's a capability they didn't have before."

The RILA example

Sometimes an overnight sensation is years in the making. Take registered indexed-linked annuities. Introduced in 2010, the products sold sluggishly for several years. Then sales shot up more than 100% from 2018 to 2020

"In 2012, we rolled out one of the first RILA products, and we rolled it out at our national conference and did a 50-minute presentation and was met with a collective yawn," recalled Ethan Young, director of insurance and annuity services for Commonwealth Financial Network. "Fast forward to today and we've got 14 different RILA products on our platform, and it's the number one selling product type in our firm."

It's not just attitudes toward annuities that is changing among advisors. The capabilities to actually deliver advisory annuities has changed as well, Merrill said. Technology exists today that didn't exist even 15 years ago, he noted.

"If you look at what it takes to support a CDA product offering, it's a totally different business model," he said. "It's not just a new product design, that you can file, launch and call in broker-dealers and RIAs and say, 'Hey guys, we put this on the platform.' It's truly a completely different business model that needs to be distributed and serviced through a different administration process."

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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