How Will The Retirement Industry Attract New Money?

As the need for income grows with more people entering retirement, the product arms race around annuity benefits will give way to the new challenge of how the industry will attract new money, annuity industry experts said Tuesday.

Fixed annuities have recently outshone their variable annuity cousins but it’s important for consumers to have options, the experts said at the Insurance Retirement Institute’s annual meeting in Colorado Springs.

“The need for income is going to go up,” said David Eikenberg, a member of the IRI’s asset management committee and an executive with T. Rowe Price.

His comments came as welcome news to an audience that had spent the better part of 36 hours grappling with big regulatory changes coming to the industry next year.

Those changes will make it more difficult to sell many annuity products and will lower the commission structures on many of them as regulators seek to wring out incentive compensation.

Big industry manufacturers like Lincoln Financial and big distributors like LPL Financial say they will continue to offer commission and fee-based products because both models make sense for retirement investors.

Only annuities are designed and structured to generate income that cannot be outlived. Tens of millions of Americans will need that income as they rely less and less on defined benefit pensions, annuity executives said.

Warren Posner, senior vice president of complex product management with LPL Financial, said new Department of Labor regulations coming next April could even reinvigorate sales of variable annuities. This will happen as new producers transition from a brokerage, commission-based model to an advisory, fee-based platform.

Annuity manufacturers this week talked about simplifying products for advisors to sell. Posner said LPL was standardizing compensation across the spectrum of annuity products it offers.

So while some advisors may leave the industry because the brokerage model no longer suits them, others will remain or transition from one model to another so long as firms give them the choice of doing so, he said.

 

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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