Panel to look at growth of RIAs, as channel grows in number, assets

The number of Registered Investment Advisors is growing faster than all sales channels in both number and assets under management, according to several surveys.

For the past 10 years, the number of independent RIA companies has grown at a compounded annual rate of 2.4% with the number of advisors growing at a rate of 5.3% a year. All other channels were flat or showed declines, according to Cerulli Associates, a wealth and asset management firm.

Maybe not a growth explosion exactly, but a unique trend that should result in an equal growth of some financial investment products, particularly annuities, which are already racking up record sales.

'Big uptick' in dual registered reps

“We've seen a big uptick in the trend of dual registered reps, whereas the number of financial professionals who are only broker-dealer reps have been declining,” said Bryan Hodgens, head of research at LIMRA. “And there's been a migration of advisors going to the RIA channel.”

Hodgens will moderate a panel at this year’s LIMRA life and annuity conference (April 14-17 in San Antonio), titled “Growth of the RIA channel,” which will look at the blossoming opportunities to sell annuities within RIAs, the expectations from RIAs, and what product and feature trends are evolving that could support the RIA business model.

“We’ll look at the regulatory and landscape of how financial professionals are operating under a fiduciary standard or suitability standard of care,” he said. “We'll also touch on the growing desire for independence; what financial professionals are seeking to create and be a part of an independent firm. And with the rise of more people going to this channel, we expect more growth of annuities from this channel.”

Along with the rising number of RIAs, consumer demand is also driving annuity sales.

'Need for guaranteed income' cited

“For the consumer viewpoint, the need for guaranteed income and annuities fit in their plan,” said Hodgens. “What we find in the RIA channel it’s because it acts as a fiduciary, it's very financial planning focused and it's advice for fee. How does the annuity fit into that financial plan and what is the value that it's bringing to the overall financial plan? Is it not only increasing income, is it reducing risk, does it allow them to do other things in other parts of their portfolio because they've got the income taken care of through an annuity? So, it becomes a very financial planning focused driven event, and the industry just believes that the demand is always there from the consumer.”

Propelled by $286.6 billion in fixed annuity sales, total U.S. annuity sales reached a record-high $385.4 billion in 2023, up 23% year over year, according to LIMRA.

“For the second consecutive year, annuity sales have surpassed previously held records, largely due to broader engagement with independent distribution,” Hodgens said. “Rising interest rates have made annuities very attractive to a larger group of investors who are served by independent advisors and broker dealers.”

Annuities sometimes get a bad rap, conjuring images of sly insurance agents fostering the product on unaware customers.

But today’s Fixed Index Annuities can offer 100% principal protection, tax deferral, and the ability to lock in gains based on the positive performance of the stock market. A recent Government Accountability Office (GAO) report specifically called for considering an income-generating annuity as part of an investor’s overall retirement plan.

“Variable annuities dominate the market over the fixed index,” said Hodgens. “We'll touch on those trends. We'll touch on some new trends where we're seeing the introduction of some fixed rate deferred annuities that have been very popular in the last couple of years.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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