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July 25, 2023 Video No comments

Annuity product trends, sales innovation and advisor opportunities

By Paul Feldman

Chris Conroy, executive vice president & principal, Insurance Agency Marketing Services, Inc., at the recent NAFA Annuity Leadership Forum discusses a new indexed annuity product, sales and product trends, as well as his views on proposed industry regulation and how annuity advisors can be successful.

Interview Transcript:

Paul Feldman:

Hello, everyone. I am Paul Feldman from InsuranceNewsNet, and today, I'm joined with Chris Conroy from IAMS. Chris, you've been in the business a while. Tell me a little bit about your background in the industry.

Chris Conroy:

Yes, great question. I got in this business kind of happenstance. I had a connection with somebody back in the late '90s and found my way into law department. Actually, coming out of law school, I got a chance to do a lot for an insurance company and learned a lot about the business, kind of soup to nuts, all the way from policy service and contracting and how you fix problems and put my lawyer hat on some. We were defending class actions and fighting regulators and all that, fighting the 151A law.

Then found myself getting into more of an entrepreneurial, kind of distribution role about 10 years into my career and really enjoyed that. So I kind of liked building businesses, getting to work for the agents.

Getting my hands dirty a bit, so I like that, and I got a chance to work at some really great distribution firms and back at a carrier as well and real pleased to be with IAMS. IAMS is a great company I've known for 25 years. It's got-

Feldman:

Do you see a lot with distribution? You're involved with NAFA. We're at the NAFA conference right now in DC. What kind of trends are you seeing in distribution right now?

Conroy:

Yes, good question on trends. So I think there's a lot of customers yearning for these kinds of solutions that offer through annuities, whether it's something simple. Right now, interest rates are up, so multi-year guarantees are kind of popular, in vogue across the industry. They're up over 100%, something like that. Index annuities continue to see a nice increase, but there's other products too. I mean, the variable annuities, RILAs continue to be real exciting products [inaudible 00:01:59], so we're part of all that. So I think there's just interest at the consumer level looking for safe money returns with good interest rates and still kind of feel the bite of last year's market volatility. The S&P 500 was down 20%. Bonds were down. The Aggregate Bond Index, I think it was -12. So a lot of people were looking for good solutions.

Feldman:

Yes, and everybody's 401(k)s became a 201(k).

Conroy:

They did. The days of 201s. I mean, maybe we're back a little bit, but yeah, that's, I think, a lot of what particularly fixed and fixed index annuities can do is take out some of those rocky ups and downs and try to get off the rollercoaster and find something with a little more predictability. Yeah.

Feldman:

So what are you seeing as far as advisors doing today to be successful?

Conroy:

I suppose there's a number of things. We work with a lot of people who are looking for ways to get in front of more people. So we have a lot of new, call it, prospecting tools, whether it's a new seminar program. I do 403(b) lead program, a number of the coaching programs we're doing. We find a lot of people gravitating towards getting in front of more people. The second thing I would say is they want to get better. They want to get better through coaching programs, learning from the best, the whole steel sharpens steel.

So we've had a rich history of doing about 20 years of training academies, and so we're always looking to reboot those, make them better, bring in the best we can, whether it's technology, leads, top agents, top carriers who are sponsors of these. So we're all excited. I think everybody wants to up their game. They feel like they got a great opportunity here in the marketplace and if they can capture it through getting in front of more people and be more effective at helping clients find their solutions, so things like our training academies.

This year, we're pleased to have six live training academies, a couple life-focused one. We just had one in Omaha with a couple three days in partnership with American Life and SILAC, but we do those with our other carriers as well. So it's exciting to get in front of people. A lot of agents are looking to get back in front of their good partners, whether it's a carrier or distribution firm, get to know them and for the ones that we haven't seen for a while is renew that relationship.

Feldman:

Tell me a little bit more about are seminars working today?

Conroy:

A lot of people, I think seminar has been popular for 10 plus years. Covid obviously transitioned that away to more of a virtual platform, in most places, that we work with agents. I would say there's probably as much renewed interest as we've seen in seminars. We launched our own proprietary seminar program recently and seen very good results, hitting topics like taxes in retirement or Social Security planning, estate planning, how all these parts fit together, holistic planning, so those can be effective. There are some areas where a customer is out on the coast, for example, where it might be a little harder to get people who want to come in, but we're seeing a lot of positive reception from seminars.

Feldman:

And so when Covid happened, there was a huge transition to virtual selling. How did agents overcome that?

Conroy:

I think some of them candidly kind of hunkered down and they did what they had to do to survive. Most agents being commission-based needed to continue to get in front of customers, so they went to their existing deck of business, a lot of people looking for solutions, and they worked their deck of business, the book of business. I think they capitalized on some referrals. We were able to help a number of them pivot to purely virtual selling. So whether it's virtual prospecting or virtual sales and that really accelerated, I think, this trend towards meeting the customer how they want to be met with the right communication.

So it's not uncommon nowadays, even those people who went to a virtual platform to engage on a hybrid basis, meaning they might meet the customer through a lead program that's virtual and then ultimately, they might even have that first engagement through some kind of virtual platform, Zoom, whatnot, and then ultimately, close the sale or continue that relationship in person. Just trying to, again, meeting that client how and where and when they want to be met is critical for success. Yeah.

Feldman:

I have one of my advisor friends, he doesn't go see clients anymore at all. He just only does it through video. He's saving so much time. He can see more people.

Conroy:

It certainly can be. Some of the old methods, think of traditional marketing, how you find people, are still very important. We do a lot. I know helping hundreds of agents, advisors improve things like their social media presence, their drip marketing, things that a lot of the advisors, agents, they don't know where to start. So they're looking for partners, people like us that can help them, and we have ways to do that and as they do more business, we can help subsidize some of those costs.

I'd say one other thing, just while we're talking here, that continues to be, in the 26 years I've been in this business, probably seen the most amount of change is innovation. So innovation, let's talk about at the carrier level. So we've seen a lot of new entrants to the space in the last year or two. You think of the companies like Aspida or ABEXUS or some of the new [inaudible 00:07:29] companies like CL Life or Farmer's Life. I mean, these are companies that literally didn't exist a year ago, maybe two years ago, and they're now very, very ultra competitive. So I think that's good for the industry, provides more competition, better offerings for the producer, ultimately more and maybe more competitive offerings for the client. We're all in the business of trying to serve their best interests. We want to get the right product because they're in the hands of the client.

So I think more money, more interest from traditional companies and the alternative asset manager, private equity side of the business is good. It's provided a lot more competition at point of sale for the client to get better solutions. And then, there's been some trend towards... I'm sure you've talked to other people who talk about how there's been a trend towards kind of more complex products and more options and bells and whistles. And that, I think, can be a good thing as long as the advisor agent understands what they're providing advice to the client. We have seen a couple more interesting simple product designs, including one literally launching today I can think of is the American Life & Securities fusion, MYGIA, which is something we've never seen before. It's really a neat-

Conroy:

A multi-year guaranteed indexed annuity, or MYGIA. They just came out with a design literally launching today that's a hybrid of a great guaranteed rate with the ability to get a performance threshold kicker. So get some of the S&P 500 growth plus worst case scenario, 4% compound rate of return. So that's a lot of short-term chassis, five years where it's really just a binary outcome. You either get four or you get 6.76 compound and commission pays 30 to 50% higher than a traditional MYGA for the producer. So that type of product, I think, is something interesting to the market, I think will get a lot of eyes and ears. And so that's kind of nice to see something on the more simple end of the continuum. And I think more continued innovation, working with banks and working closely with actuaries and sales and trying to meet what the field ultimately needs is important and we're pleased to be part of that.

We're also pleased now to be in the RILA space, so the register index-linked annuity, so partnership with a wholesale broker dealer. We now can offer RILA products, the Athene product and Brighthouse, couple notables that are top of the heap and that's a good fit. It's solving that retirement income plan puzzle for clients is really a combination of solutions and it's also what's most comfortable for the advisor who's got to go back and work with those clients. Yeah.

Feldman:

So what type of innovations do you see continuing to happen? If you had a crystal ball, what would you predict would happen in the next few years?

Conroy:

Yeah, good question. I think we'll continue to see the banks working closely with, the investment banks working closely on new designs and little bit is following from, frankly, what Europe's been doing for quite a while. And so what we've seen in the big investment houses for years and years is making its way to better solutions with innovation kind of at the crediting engine side. I do think there's some interesting Rider type of benefits. For example, the Equitrust BRIDGE product, which is a true LTC combo annuity product. Those kind of benefits, I think, are very lucrative for many customers where there's a need for long-term care.

Feldman:

It makes a lot of sense because we all may need it.

Conroy:

We all may need it and it's too late, usually, or too expensive when you get to that age. So those type of products, I think, are interesting. I know talking to some of the carriers, they're looking to provide those kind of benefits, the "what if" benefits. So I think we'll see a more Rider designs. It has been a move towards shorter duration type of products. I think we're probably seen some of the highest percentages, people looking at five-year, six-year, seven-year type of... some of that's the yield curve. So we'll see if things change, if things go back to normal. But I think there is maybe a growing interest in shorter term products on the five, six, seven-year kind of duration as opposed to-

Feldman:

Yeah, not those 15, 20 years.

Conroy:

... 10, 20, 50. Not that there aren't times where that's certainly appropriate, particularly if a client's never going to really need to take more than free withdrawals out during that period. But there has been a trend towards certainly 10 or less years over the last couple years.

Feldman:

So put your compliance hat on. What is something that advisors should be really worried about when they're writing business?

Conroy:

I think first and foremost is making sure they know what their standard of care compliance needs to be. We work close... we do over 300 webinars per year. Some of those include some compliance-related materials. We partner closely with the carrier's compliance legal teams to disseminate out that information. So I think of things like the new NEIC 275, the updated suitability model, and not all people understand it and it's still getting passed around. I think it's in 35 states, perhaps. So we'll have more that follow. And so making sure what those additional disclosure requirements are would be, number one, is just to stay at the top of current suitability regulations.

I think there's growing interest. I literally just came from a meeting downstairs. We were talking in the Government Affairs Committee. There's some oddball cases out there. There's one that the SEC's brought against an investment advisor who was selling annuities and purportedly replacing a lot of them. And the SEC is seeking to come in there, kind of second guess, Monday morning quarterback those exchanges, indexed annuity to indexed annuity, which isn't a security, and whether they can do that. So I think that case got a little bit longer to figure out whether the SEC is going to prevail. But yeah, we're watching that real closely.

And then, the Department of Labor. So we're out here in DC. We fought this battle in 2010. We fought it in 2016. We won. We won. Surprisingly, coming out of the Trump administration, the DOL Rule 3.0 sailed through and actually during the Biden administration, they let it go into effect. And so we have an existing DOL Rule 3.0 that we've helped a lot of people figure out the compliance. So there's those different ways to do that, whether you're compliant with Reg BI or you're using what's called a PTE 84-24 compliance form, there's different ways to jump through that. And we hear that and [inaudible 00:14:17] be curious to hear what we hear at this conference, which is what's 4.0? It's kind of amazing. We're talking about this 13 years later, but I think the Department of Labor really feels like they want to get in there and go after qualified plans.

Feldman:

They just want to get bigger, I think.

Conroy:

They do. And there's really been no proof of any egregious abuses or problems in our industry. Largely, we're here at the Fixed Annuities Conference talking about fixed products which, again, zero's your hero. Can't lose principles, so I'm not sure there's a lot of problems to fix here. But nonetheless, we support fair and balanced regulation where it makes sense. I guess our position would be let's let the suitability regulation run its course and the SEC Reg BI run its course and go from there. But I do think there will be continued pressure towards providing greater consumer protection because it's politically attractive. Whether there's problems to stomp out or not, it is a good kind of sound bite. So we're prepared to respond and be there for our [inaudible 00:15:25] agents. Yep.

Feldman:

One of the problems I see too with agents that are dually licensed is how can you be a fiduciary and sell an insurance product. Because you don't really have control over the insurance product. The insurance company has all the control.

Conroy:

That's a great question is things like, "Can you put on a second hat?" I mean, literally take off your fiduciary hat, put on your insurance only hat where you're subject to the state suitability regulations. You can take off your fiduciary hat, the investment advisor's fiduciary hat. That's a little bit of what is being alleged up in Massachusetts with that Cutter case. So we're going to see what that develops into. We work with plenty of advisors who also sell insurance products, i.e. annuities, and that line [inaudible 00:16:15].

Feldman:

As I think they should. I think they should.

Conroy:

It seems like it might be their best interest for a lot of clients who are looking for safety and guarantees. You really, as an advisor, should be looking to those solutions. So I would say this. Precedent law has supported the idea with appropriate disclosure. You can wear two different hats as long as you're fair, explaining that to your client. We'll watch where that develops. Again, with that Massachusetts case, that could change the state of affairs at least maybe in some places of the country. So we're closely watching that and I think that's a tough answer. I mean, today, it seems like if you had a good sale and it's been ratified by that insurance company who has their own suitability department, why should we second-guess that by a regulator maybe five, 10 years later? So I think we got everything we need.

Feldman:

It's crazy. We've done a pretty good job of monitoring our own business and coming out with the suitabilities. I think carriers are really scared of lawsuits.

Conroy:

Well, they probably are. I mean, insurance companies, IMOs, insurance agents, they don't want regulatory or private litigation problems. None of us do. There was a time when I was defending class actions for companies and yeah, I can tell you the boardrooms, they don't want potential multi-million dollar-type of losses. So you're right about that. And I think at the heart of it, everybody wants to do the right thing by the client. Sometimes, you might not know if you are or not. So suitability has come a long way. I was talking to some of my friends here, Kevin Meckley at Salmons, and he and I were working together. I think the first suitability regulation was maybe 2003? So we're 20 years into that. And back then, it was pretty rudiment. It was like a two-question form. How is this going to help you write a subjective answer? You're good to go. And we've come a long ways.

Feldman:

I mean, how many pages is a annuity app nowadays?

Conroy:

All in, well, the paperwork, there's app kits that are 60 pages long with all the disclosures and additional things.

Feldman:

It's like buying a mortgage.

Conroy:

It is almost more complex than a mortgage. I mean, you think about it. Again, we're talking about Principal Protected Products here. All that said, I think there are some tools, technology, I mean, things like Firelight and other order entry systems that have made it much easier and faster. Maybe the process is pretty slow from the point when they first talk to the client to when they actually get their policy. A lot of times, could be more than 30 days if money's coming from another insurance company. So it seems like that process has got to get shorter. We need to get to where banking was 20, 30 years ago.

Feldman:

It’s easy to refinance your mortgage, refinance your house, buy a house. It's fairly painless. They could send you the PDF. And you just click everywhere for your signature.

Conroy:

Sure.

Feldman:

Because nobody reads all the fine print.

Conroy:

Nobody does. Maybe they should.

Feldman:

But they should.

Conroy:

You all have a responsibility, obviously, to understand what you're buying.

Feldman:

Absolutely.

Conroy:

I do think, as you're talking about what could be happening in the near future, I would say there will be disruptors. There will be companies coming in and saying, "Can we win with speed to market," for example? So instead of 30 days to get money and issue a policy, what if we could do it in one day or three days?

Feldman:

And money moves so fast these days or it can move.

Conroy:

So, I think that is a, from an IMO perspective, we're a very high touch, high service type of organization. So we're the ones who's the connection with the insurance companies, do all the back office work for them. So I will tell you firsthand, the companies that can process business consistently faster and more accurately are winning some market share. They're picking up business not because they have the best rates, but because they're the easiest to do business with. So I guess there might be a question of like, "Well, if there's enough of these disruptors who are winning in that space, is the rest of the marketplace going to have to get to that level of service?" So we'll see.

Feldman:

So is there a question that I didn't ask that I should have asked?

Conroy:

I suppose there's a lot of talk in the IMO world about aggregation and acquisition of firms. We're proudly independent. Being one of the partners myself, I could tell you we have an interest in staying independent. We feel like it's an advantage to be one of those owners who are literally on the phones, entrenched with our customers day in and day out. We have skin in the game. We can make decisions quickly, invest when we want to. We can hire people. We can make those decisions real quickly. There has been a continuing trend with a couple of the larger private firms that are buying these organizations like us up over time.

So what does that mean for the industry? Consolidation generally can be a good thing if it creates greater efficiency for the whole marketplace. I think it's probably putting carriers in a really tough position right now. So if you're a firm that does business with 100 different IMOs and there's three or four that end up controlling almost everything, feel like they've got a lot of the power and they can come in and kind of name their terms. So-

Feldman:

I like to call them the super IMOs.

Conroy:

... super IMOs, perhaps, super aggregators. And so we don't have anything bad to say about that model. It's a logical business decision to do so. So I think it puts a lot of pressure on those insurance companies because ultimately, what they pay, IMOs and distributions as a whole, goes into the pricing of the product. So you can either give it... it's a three-legged stool. The way I always learned it, right?

Feldman:

Yes.

Conroy:

So have the insurance companies, you got to take care of them. You don't have any profit. You don't keep your ratings. You don't keep your solvency. You're out of business. You got to take care of distribution because you got to pay them something, a livable wage or a wage that help them survive as a business or else they can't distribute your product. And you got to take care of the policy owner and you got to offer them great products and whether they're best rates or unique rates or unique offerings.

So I wonder if, again, that trend towards aggregation is going to put more pressure on insurance companies. Which leg do you put the money in? Because some of the firms might demand a higher total commission. And that's going to put pressure on the other two legs.

Feldman:

Yes, I understand. Well, Chris, I really enjoyed our conversation today.