Making sense of the RILA revolution

With sales topping $24 billion in 2020, registered index-linked annuity (RILA) sales have maintained a 38% compound annual growth rate since they were introduced nearly a decade ago.* What’s behind the popularity of this relatively new product? Discover the “why” behind the fastest growing annuity category in our industry today.

The evolution of an industry

The financial industry continues to evolve to meet the ever-changing demands of consumers. When fixed indexed annuities (FIAs) were introduced in the mid 90s, they filled in a rather large gap in the annuity risk spectrum, answering the call for growth potential beyond a simple fixed rate of return while providing guaranteed protection from loss due to market downturns. RILAs were the next logical step. RILAs hit the market in 2010 and have been steadily building momentum by addressing the growing demand for stronger accumulation potential with managed market risk.

Innovation with purpose

Also referred to as buffered annuities, structured annuities or indexed variable annuities, RILAs are viewed as a cross between a fixed indexed annuity (FIA) and a variable annuity (VA). While the majority of FIAs are designed with income in mind, RILAs are built for growth. In fact, out of all the annuities available today, RILAs offer the highest accumulation potential of any risk-managed annuity product.

RILAs manage risk with buffers or floors, tools that provide investors the opportunity to pursue growth potential based on their individual tolerance for risk. In exchange for taking on some market risk, clients can experience greater growth potential in the form of cap and participation rates generally higher than FIAs — making RILAs an attractive solution for accumulation-oriented investors and a viable alternative to VAs.

“RILAs have bridged the gap between FIAs and VAs,” says Grant Kvalheim, CEO and President of Athene USA. “They’re a great solution for clients in need of a financial product that can promote asset growth while providing a level of protection from volatile markets.”

Weathering the storm and coming out on top

As it turns out, RILAs happen to be in the right place at the right time. With the global pandemic, increased market volatility and persistently low interest rates, today’s economic conditions have created a “perfect storm,” contributing to the increased market share RILAs have experienced in recent years over other annuity types.

Faced with today’s challenges, consumers may be more likely to seek risk-managed products to help protect what they’ve gained combined with strong accumulation potential to maintain asset growth. These lingering fears and feelings of uncertainty have created an opportunity for change, accelerating the need for RILAs in the marketplace and furthering a shift toward accumulation in the annuity industry.

According to Kvalheim, “RILAs are a timely and innovative solution that addresses the evolving needs of today’s investor in an increasingly complex planning environment.”

Tips to help narrow the field

With RILA sales booming, carriers continue to jockey for position by offering new products in hopes of capturing their piece of the pie. But with such stiff competition, it can be hard to determine the best fit for your client. It’s important for financial professionals to analyze each product and carrier with a critical eye before offering a RILA – especially in light of the new DOL fiduciary and best interest rules.  

To determine which RILA may be the right solution for your client, answer these five questions to help narrow the field.

* LIMRA Secure Retirement Institute, “U.S. Individual Annuities: 2020 Year in Review.”

Registered index-linked annuities have a risk of substantial loss of principal and related earnings. They are designed to be a long-term investment product used to help provide income for retirement and are not suitable as a short-term investment.

This material is a general description intended for general public use. Athene Annuity and Life Company (61689), headquartered in West Des Moines, Iowa, and issuing annuities in 49 states (excluding NY) and in D.C., is not undertaking to provide investment advice for any individual or in any individual situation, and therefore nothing in this should be read as investment advice. This material should not be interpreted as a recommendation by Athene Annuity and Life Company or Athene Securities, LLC. Please reach out to your financial professional if you have any questions about Athene products or their features.

ATHENE ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY FDIC OR NCUA/NCUSIF. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT.

Registered index-linked annuities can only be marketed and sold by securities licensed financial professionals. Any discussion of this product must be preceded or accompanied by a Prospectus.