Indexed, variable annuity sales slump as DOL fiduciary rule looms

Uncertainty around the rule may be contributing to tentativeness from advisers and distributors

May 18, 2017 @ 4:55 pm

By Greg Iacurci

Annual sales of indexed and variable annuities took another nosedive in the first quarter with the Department of Labor's fiduciary rule set to come into force.

Despite a stronger equities market and interest-rate environment, the fiduciary-rule factor "overwhelmed" their positive impact on annuity sales, said Todd Giesing, assistant research director at the Limra Secure Retirement Institute.

Variable annuity sales declined 8% year-on-year in the first quarter, to $24.4 billion, according to data from Limra, an insurance industry group. Indexed annuity sales were off 13%, to $13.6 billion.

Implementation of the fiduciary rule, which raises investment-advice standards in retirement accounts, is currently set for June 9. As of that date, many more brokers and insurance agents will be considered fiduciaries, a higher standard of care from the present, when selling annuities and other financial products to retirement investors.

All of the rule's provisions, including one that increases litigation risk for advisers and their supervisory firms for selling certain products such as indexed and variable annuities, will come into force in 2018.

There's a chance the Trump administration will seek a delay in both implementation dates, and a revision of the rule's contents. Those changes may include shielding variable and indexed annuities from the litigation risk that currently exists under the rule's best-interest contract exemption.

"I think somewhat with the uncertainty out there, that's impacting sales," said Mr. Giesing, who explained it creates a "tentativeness" among annuity distributors and advisers.

Variable annuity sales have been on the decline for the past half-decade, but indexed products, which have had nine consecutive years of sales growth, have been a bright spot for insurers.

Limra is forecasting annual indexed sales to fall off 5%-10% this year over 2016, and 10%-15% for variable annuities.

One bright spot for insurers in Q1 was structured annuities, also known as buffer annuities, a sort of hybrid between indexed and variable products. Sales of structured annuities were up 60% year-on-year in the first quarter, but represent a small sliver of total sales, at $1.7 billion of the total VA market.

They're sold by fewer than five carriers, and more than 80% of their distribution comes from banks and independent broker-dealers, according to Limra.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Retirement: it's no longer about feeding pigeons from a park bench.

Today's retiree's expect so much from retirement than previous generations and advisers are in prime position to help their clients what's important and what's not.

Latest news & opinion

CFA Institute adding crypto, blockchain to curriculum

Subjects will be added to its Level I and II coursework for the first time next year.

Trump tax plan making dividend ETFs hot

Funds that are seeing inflows largely steer clear of sectors like utilities.

Wells Fargo Advisors continues to see a decline in brokers

Company also set aside $114 million over fees for rich clients.

Morningstar to replace funds in its managed portfolios with nine of its own

New sub-advised funds, offered exclusively through financial advisers, are intended to lower costs and provide 'greater flexibility.'

Average client assets top $2 million for first time

Charles Schwab's latest RIA Benchmarking Study reports organic growth is driving increased AUM and revenues.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print