Weatherford Era Comes To A Close At IRI

Last week’s announcement that Insured Retirement Institute president and CEO Cathy Weatherford would retire next year brings to an end her decade-long effort to broaden the IRI’s appeal beyond the variable annuity industry.

In hindsight, enlarging the tent to include other segments of the annuity industry was perhaps the single most important strategic decision authorized by the IRI, then known as the National Association for Variable Annuities (NAVA).

NAVA was “hyper-specialized in what it represented,” Weatherford said. “When the switch to the IRI took place, that umbrella opened wider.”

Widening the appeal of IRI beyond variable annuities to include fixed, indexed and income annuities, IRI pulled more organizations into its sphere of influence. That strategy is expected to continue after Weatherford leaves IRI in December 2018.

Fixed indexed annuities, which generated record sales of $58 billion last year, helped IRI as new annuity companies joined the organization.

Broadening the Base

For IRI, the issue is no longer one of defending the narrow interests of variable annuity manufacturers and sellers. Instead, the issue is promoting interests connected to generating retirement income to a nation of baby boomers losing their defined benefit plans.

Speaking to an insured retirement should receive a receptive audience. Dropping the word “annuities” from IRI’s title altogether may have been the organization’s ultimate masterstroke, given the perceptions people still carry about annuities

Thousands of baby boomers turn 65 every day, and nearly 46 percent of them have no retirement savings, according to the IRI’s 2017 report on the baby boom generation. As a result, industry experts say retirement underfunding is quietly reaching a crisis point.

As many as 85 percent of baby boomers say it is important to have a source of guaranteed lifetime income, according to IRI's report. But only 8 percent of boomers said they would even consider an annuity.

“Educating the public as to the benefits of an annuity is a top priority for IRI,” Weatherford said. “For that reason, we lead the National Retirement Planning Coalition (NRPC) and offer a wide variety of consumer resources available for free on the internet.”

VAs Dominant – Until the Tide Turned

In 2011, the industry sold a record $159 billion worth of variable annuities. Variable annuities had outsold fixed annuity industry every year since at least 1999.

Leading up to the 2008 financial crisis, variable annuity sellers thought nothing of income guarantees paying up to 7 percent or 8 percent for life on their products. Companies were engaged in an arms race to pay annuitants even more.

That year, when overall annuity sales reached a record of $265 billion, variable annuity sales crushed fixed annuities, sales of which registered only $109 billion.

It wasn’t long before the tide turned.

By then IRI had long ditched its variable annuity title and was speaking to insured retirement strategies offered by banks, asset managers, broker/dealers, distributors and financial advisors.

Variable annuity sales declined from their 2011 high of $159 billion to $105 billion last year, and even finished below the $117 billion in fixed annuities sold in 2016.

Analysts said it was the first time in a long time that anyone could remember when variable annuity sales had dipped below fixed annuities.

Advisors and asset managers gathered at the annual IRI conference in Palm Beach earlier this week could only marvel at the turn of events.

Standing Her Ground

Low interest rates and insurance company “derisking” strategies weren’t the only reasons for the precipitous drop in variable annuity sales.

Department of Labor regulators pushing for a fiduciary standard also played a role in eroding variable annuity sales, even if that wasn’t their intention.

But as it turned out Weatherford, a former regulator herself and CEO of the National Association of Insurance Commissioners, was the perfect fit to lead the counterpunch to stave off what the industry perceived as a heavy-handed approach by fiduciary rule proponents.

Weatherford knew where to push back and stand her ground in the IRI’s pursuit of “fair and effective legislative regulatory policies,” harmonized across a multiplicity of regulatory agencies.

Any regulatory standard needs to be practical and workable for the whole supply chain working in the retirement income industry – banks, asset managers, insurers, broker/dealers, advisors, wholesalers and solution providers, she said.

By the time the regulatory agencies and the Trump administration settle on a regulatory framework acceptable to all, Weatherford is likely to be long gone.

In the meantime, IRI will push forward to corral new members from the financial technology, or FinTech, sector as well as insurance marketing organizations (IMOs).

Over the past two years, IRI has increased its membership by 43 dues-paying companies, broadening the umbrella of individuals represented by IRI by tens of thousands.

“We hope this trend will continue,” she 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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