Fee-based VA Sales Jump 70% in 1Q

Sales of fee-based VAs, one of the industry’s best hopes for cracking the registered investment advisor channel, rose 70 percent to $780 million over the year-ago period, LIMRA reported.

Fee-based VAs have delivered steady growth over the past three quarters, although fee-based VA sales still only make up 3 percent of overall VA sales.

Last year, fee-based VA sales were $660 million in the fourth quarter and $550 million in the third quarter, data show. In 2017, fee-based VA sales reached $2.2 billion, or 2.7 percent of all VA sales, LIMRA said.

Fee-based annuities do not pay a commission to agents and come with different surrender charges or none at all.

Overall VA sales are expected to improve this year over last year as companies raise crediting rates for guaranteed living benefits and loosen restriction on investments, said Todd Giesing, annuity research director for LIMRA Secure Retirement Institute.

“Combined with the vacated Department of Labor fiduciary rule, we expect VA sales will improve throughout the year,” Giesing said. “As a result, LIMRA SRI is forecasting VA sales to be 0-5 percent higher in 2018, compared with 2017 results.”

Overall, U.S. annuity sales were $51.8 billion; level with first quarter 2017 results, LIMRA reported.

Fee-Based Indexed Annuity Sales Also Rise in 1Q

Fee-based sales of indexed annuities were $60 million in the first quarter, or about 0.42 percent of all indexed annuity sales, Wink’s Market & Sales Report reported. The 0.42 percent share was unchanged from the fourth quarter, when Wink first began keeping track.

Last year, fee-based indexed sales were $57 million in the fourth quarter, $48 million in the third quarter, $23 million in the second quarter and $10.3 million in the first quarter, according to Wink.

First quarter 2018 indexed annuity sales rose 11 percent to $14.5 billion, compared with first quarter 2017, Wink said.

Fee-based annuities have a long way to go before racking up significant sales compared to their commissionable cousins, analysts say.

But advisors who have in the past been reticent to sell annuities because they cost too much and were difficult to explain, have recently shown more interest now that more annuity compensation models come with fees as well as with commissions.

Long-Term Hope for Fee-Based Annuities

In the long term, fee-based product growth holds promise, said industry consultant David Lau.

Dually registered RIAs will be able to migrate away from broker-dealers for a fee-based annuity sale, he said.

“We see that as a big movement,” said Lau, founder and CEO of DPL Financial Partners, which develops fee-based products for large insurers.

Dually registered advisors and fee-based financial advisors manage as much as $4 trillion in assets, according to Tiburon Strategic Advisors.

The other reason to be optimistic about fee-based annuities has to do with pricing changes and lower costs, long a pet peeve of advisors. Many fee-based annuities come with contract fees as low as 0.35 percent of the account value.

The economic environment may be spurring RIAs at looking more closely at annuities because bond yields are so low that there’s little point in moving retirement savings into bonds, Lau said.

Indexed annuities by contrast offer more attractive returns.

There were 10 indexed annuity companies offering fee-based indexed annuities at the end of the first quarter, Wink reported.

The top fee-based indexed annuity sold in the first quarter was Allianz Life Retirement Foundation ADV Annuity.

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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