Distributors Foresee Annuity Boom Through Advisory Channels

By John Hilton

BALTIMORE -- Raymond James Insurance Group executives spend a lot of time in meetings sorting through issues related to commission-based sales.

While the Department of Labor fiduciary rule is gone, tossed out by a federal appeals court one year ago, the compliance spotlight it shone on commission annuity sales remains.

"At every one of these meetings, we say 'You know if we were just 100 percent advisory we wouldn't even be having this discussion,'" said Scott Stolz, president of Raymond James Insurance Group.

Stolz was part of a final-day panel titled "Distribution Speaks" at the 2019 Retirement Industry Conference.

Raymond James has about $62 billion worth of annuities on the books, Stolz said, and advisor-based sales are growing, but slowly. The advisory side accounts for about 15 percent of sales, with variable annuities leading the way, he said.

The panel agreed that advisory compensation systems will some day win out.

"There's going to be a day where we say 'You are making this decision for us,'" Stolz said.

If the industry doesn't figure out how to effectively provide distribution of annuities via advisory channels, "sales are just going to fall off a cliff," Stolz said.

"We need to provide guaranteed-income products to clients who prefer advisory solutions," agreed Greg Jaeck, senior product leader at Edward Jones.

If efforts are successful, annuity sales could double, or even triple, he added.

The session was moderated by Christine Tucker, vice president of marketing for Pacific Life. She began with these two slides:

Retail annuity sales are shifting #retireconf pic.twitter.com/kd5XiYeYfr

— INNJohn (@INNJohnH) April 5, 2019

More stats on shifting annuity sales. #retireconf pic.twitter.com/of6i1Izg2l

— INNJohn (@INNJohnH) April 5, 2019

Annuity sales rebounded strongly in 2018, and the panelists said that trend is expected to continue in 2019. The ill-fated Department of Labor fiduciary rule had a big impact on the annuity sales dip, Jaeck said.

"The DOL impacted us quite a bit," he said. "We shut down sales twice in 2017. That doesn't help sales numbers at all."

Edward Jones expects to hit $4.5 billion in sales this year, up from $3.2 billion in 2017.

However, the annuity sales rebound is favoring accumulation products over income. Tucker questioned whether that is the best move for clients and how income annuities can sell better.

"Advisors don't like to sell DIAs and SPIAs because lets face it, it makes the assets go away," Stolz said of income annuities. "The message we're trying to get through to advisors is if you handle the income ... investing the rest gets so much easier."

'Incredible Amount Of Work'

Speaking of the manufacturing, panelists said the annuity designs are often too complex to manage. In some cases, nobody at the insurer even has any familiarity with a particular annuity option.

"It's an incredible amount of work to manage these riders appropriately," Stolz said. "We have trouble getting advisors to turn on the income. ... The first insurance company that can help is with this and make it easier to manage the block ... would be greatly appreciated."

Jaeck agreed, adding that each carrier "is in a different place" with technology. "Even just starting a rider. Some provide forms, while some don't do forms."

While carriers keep rolling out new annuity designs, Stolz isn't sure they need to.

"If it were up to me, I would not vote for anything new. I've got too many products as it is," he said. "Most of the time, we conclude that it's really not that different. It's just repackaging the same thing."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.