Allianz is finding traction with fixed indexed annuities in the financial advisory world with the top-selling FIA in the independent broker-dealer channel.
And Tampa-based advisor Barry Flagg can see why -- though with some caveats.
"I'm a fan of the concept and the concept is well executed by some carriers, but not well executed by others," Flagg said. "It's a valuable product but you've got to do your due diligence with it."
And that is precisely the balance that life insurance companies have been looking to find with broker-dealers and registered investment advisors. As companies grow into the advisory sphere, they are searching for the sweet spot to make FIAs valuable both to advisors and for carriers.
"What we are seeing in the broker-dealer space over the last four years is a real acceptance of indexed products," said Jason Wellmann, senior vice president Life Insurance Sales for Allianz.
Wellmann attributed the success to three factors:
- Product innovation: Fee-based designs that have eliminated the traditional objection that only commission-based solutions existed in the market.
- Income protection: Advisors acknowledge the need for income protections and insurance products if they are going to serve clients more holistically in a fiduciary advice era.
- New technology platforms: They connect RIAs and broker-dealers more efficiently.
Financial advisors like Flagg, with memories of inflated illustration scenarios and misleading sales practices still fresh in their minds, remain leery and warn of inflated assumptions that come with some indexed products.
But in some ways it’s skeptics like Flagg, at Triangulum Partners, who invite the insurers to re-engage advisors and agents about the value of indexed products.
“The point is indexing is no longer a challenging story and people are more comfortable with indexing and understand how it works,” Wellmann said.
Hints at a Subtle Shift
Indexed annuities and indexed life insurance are linked to market indexes and expose clients to higher potential gains than a fixed product.
It helps that insurers offer choices and flexibility among the palate of fee and commission-based options.
Low interest rates and the new requirements of the fiduciary era can probably take some credit for renewed curiosity – a “subtle shift” – in the necessity of not just an investment management strategy but a risk management strategy too.
“We have experienced this subtle shift as well in individual meetings with executives from some of the largest RIAs,” said Corey Walther senior vice president of Distribution Relationship Management and Business Development for Allianz.
“It may take time to become more mainstream, but we’re definitely noticing this shift,” he said.
Three years ago, Allianz would not have reported any conversations with advisors about guaranteed income, but those days are gone, ceding to conversations about fee-based products, Wellmann said.
Five years ago wirehouses would tell insurers they had no interest in selling indexed products, but that was when variable annuity sales were higher than they are now.
Now broker-dealers are coming around.
“Since then we've seen a higher adoption of indexed products among broker-dealers, and now many insurance carriers are making indexed products for the broker-dealer space,” Wellmann said.
Indexed Annuities, Indexed Variable Annuities, Indexed Life
Last year Allianz 222 Annuity was the top-selling indexed annuity sold through independent broker-dealers, according to Wink’s Sales & Market Report.
Allianz’s Retirement Foundation ADV Annuity was the top-selling fee-based indexed annuity in the market.
Allianz also had the No. 2 selling indexed annuity for both the independent and full service national broker-dealer channels, Wink reported.
Indexed annuity sales, of which $54 billion worth were sold last year, fell compared to 2016 but analysts expect sales to pick up in 2018 as the uncertainties surrounding the Department of Labor’s fiduciary rule fade.
Index-linked variable annuities, known as buffered variable annuities, wrapped up 2017 with $9.2 billion in sales, up 25 percent from 2016.
Allianz Life sold about $2 billion worth of its Index Advantage variable annuity last year, up 40 percent from 2016, said Walther.
Indexed life, meanwhile, was on a tear last year with sales rising 6 percent over 2016 and far surpassing overall life insurance market growth, Wink reported.
When Wellmann joined Allianz back in 2010, the indexed life space was an $800 million market. That market has grown to nearly $2 billion.
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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