The next frontier: Fee-based annuity sales offer peek into the future

ORLANDO – Sales of fee-based annuities are growing significantly, but at $8 billion, remain just a small portion of overall annuity sales.

LIMRA projects $6.9 billion in fee-based variable annuity sales this year, and another $1.1 billion in fee-based fixed-indexed annuity sales. Those numbers are up from $4 billion and $466 million, respectively, in 2022.

Still, overall annuity sales of $430 billion remain primarily executed through the traditional commission-based distribution channels. A panel of industry executives pondered Monday just how fast and how much fee-based products could capture more market share at the LIMRA 2025 Annual Conference.

One trend that is happening is carriers moving away from just creating a 1035 exchange, explained Cooper Sinclair, vice president of strategy at Midland Advisory.

A 1035 exchange is a tax-free transfer of certain insurance or annuity contracts, allowed under Section 1035 of the Internal Revenue Code. It lets clients replace one policy or contract with another without triggering current income taxes on any gains.

While 1035 exchanges still drive most sales in the space, it is "a good way to get into the market for a lot of advisors that are dipping their toe into annuities," Sinclair said.

At Midland and Sammons Financial Group, about 55% of fee-based flows are new money cases, Sinclair said. "That would have been unheard of 10 years ago, actually five years ago," he said. "So, new things are happening there."

New advisory annuity products

Carriers are taking the advisor space into account with new products, Jackson National being the latest example. Three weeks ago, the insurer introduced Jackson Income Assurance and Jackson Income Assurance Advisory, fixed index annuities with an embedded guaranteed minimum withdrawal benefit.

"One of the things that we're doing to continuously try to get into this advisory or fee-based space is align not only an advisory product within this case, but also make it fee-friendly or fee from contract," said Kim Plyler, senior vice president for distribution and product strategy at Jackson National. "All that means is that the advisor can then pull their fee from that contract and not impact the living benefit."

Suzanne Amari, vice president and head of annuities product at Prudential Financial, said her company is also pushing into the advisory space.

In July, Prudential launched ActiveIncome, a new insurance overlay option for lifetime income on investment accounts. The product, developed in partnership with asset manager Dimensional Fund Advisors and insurtech company FIDx, is designed for registered investment advisors (RIAs) and their clients.

Prudential is trying to solve "friction points," or objections to annuities from the advisor world, Amari said.

"A lot of the feedback that we hear is, 'Well, we're not integrated into the RIAs ecosystem,'" she explained. "They don't want to lose control over the assets. They don't want to transfer those assets to the insurance carrier. And so the approach that we're taking with the insurance overlay is to get at those friction points and see how we can solve them."

© Entire contents copyright 2025 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.