Insurance network for RIAs says MYGA is the future for annuity sales

DPL Financial Partners is betting on demand among RIAs for a simple type of annuity, the MYGA, to use as an alternative to bonds, savings accounts and certificates of deposit.

On Wednesday, the company added 11 more multi-year guaranteed annuities, or MYGAs, to its commission-free marketplace, which previously included a single product in that category.

“It will be a true marketplace, rather than an individual product or two,” DPL CEO David Lau said. “We went to carriers, and said, ‘We need more commission-free products.’”

DPL added products from three more providers, with the marketplace now offering MYGAs from Security Benefit Life, Great American Insurance Group, Guaranty Income Life Insurance Co. and Midland National Life Insurance Co.. There are three additional carriers that will likely add products during the first quarter of 2022, Lau said.

The MYGAs available through DPL have durations ranging from three years to 10 years and rates from 2.1% to 3.25%, according to the company.

The Louisville, Kentucky-based firm added its first MYGA in late 2018, a four-year-duration, commission-free product it developed with Security Benefit, according to data from Moore Market Intelligence and Wink.

Prior to the recent additions, that product was the only commission-free MYGA on the market, Lau noted.

DPL is an insurance and annuity network for RIAs, providing commission-free access to products for advisers who aren’t licensed to sell the products.

The firm, which early this year announced that it had secured $26 million in private equity funding, in August partnered on an insurance product marketplace with SS&C.

For advisers who are unacquainted with MYGAs, they could be compared with CDs that lack the FDIC insurance but have the benefit of tax deferral, Lau said. Unlike traditional fixed annuities, MYGAs can guarantee yields for more years, and they can serve as an alternative to bonds and CDs.

“These products can play the role that short-duration fixed income can within the portfolio,” Lau said.

Sales through RIAs have accounted for a small fraction of industrywide annuity transactions, as advisers have been slow to accept the products. What could make MYGAs appealing for RIAs is that the products give them a way to attract held-away assets, Lau said, since MYGAs can have higher yields than bank products.

“I think we’re going to see some more usage of the MYGA,” he said. “It’s also a way for RIAs to bring in assets that might be held at a bank by their clients.”

Industrywide, MYGA sales were on a tear until the third quarter, according to Wink’s sales and market report.

“MYGA sales are actually down severely this quarter. The $11.5 billion market as of [the third quarter] was [down] 20.22% from the prior quarter, and [down] 30.82% from the same period, the prior year,” Sheryl Moore, CEO of Wink and Moore Market Intelligence, said in an email.

However, those figures are down from very high sales numbers prior to the decline, Moore noted. Sales through RIAs accounted for 0.1% of MYGA transactions in the third quarter.

Among all deferred-annuity sales, only one MYGA, MassMutual’s Life Stable Voyage 3-Year, was among the top 10, according to Wink.

The commission-free product that Security Benefit developed with DPL accounted for about 5% of that insurer’s MYGA sales during the third quarter, Moore noted.

The simplicity of the products makes them easy to sell, she said.

“The MYGA product is preferred over traditional fixed annuities because the rate is guaranteed for more than a single year,” Moore said. “It is an easy sale for the salesperson, if they can offer a prospect a guaranteed rate of X% for Z years.”