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Survey Shows High Hopes for Fixed Index Annuities This Year


Back in March, Saybrus Partners, Inc. surveyed a group of financial professionals regarding their expectations about fixed indexed annuity sales for this year. Their expectations were very high, but keep in mind that this survey occurred before indexed annuities were included in the DOL fiduciary rule’s BICE requirements. Earlier this month NAFA summarized the findings in an article for their Annuity Outlook Magazine entitled “Survey Finds Vast Majority of Financial Professionals Expect Continued Indexed Annuities Sales Growth in the Next Year.”

Eighty-three percent of those surveyed believed that indexed annuity sales would increase over the next year. Perhaps even more telling was that 52% of the financial professionals expected double digit sales increases over the next year. These results go right along with LIMRA SRI sales data from 2015 showing an increase of 13% for fixed indexed annuity products. Indexed annuities had record high sales in the 4th quarter and full year of 2015. Of the top 5 products that showed the most sales growth for these financial professionals over the past year, indexed annuities were number 1. Forty-three percent of them saw indexed annuity sales growth. Variable annuities took the 4th spot, but just 7% of respondents saw growth in this category. Banks were the fastest growing channel for fixed indexed annuity sales.

The managing director of Saybrus Partners, Inc. attributed the indexed annuity growth to the flexible benefits and inexpensive fee structure that these products offer. Another reason for the growth is that people turn to indexed annuities during a bear market. More than half of the financial professionals said that fixed indexed annuities are the best product for their clients when markets are undergoing a correction or in a bear cycle. They beat out actively managed portfolios, life insurance, variable annuities, managed accounts, and mutual funds by a significant percentage. It’s a good time for a product that offers principal protection as well as the potential for market upside gains. Financial professionals and consumers like indexed annuities for their income guarantees, protection from loss, and the plethora of benefits and options available. Indexed annuities can help you meet your retirement goals while accounting for both longevity risk and market risk.

Responses to the question of what could be done at the organizational level to increase indexed annuity sales made it clear that the products available are not an issue. The financial professionals were looking for better support at the point-of-sale, more multi-solution products, better technology, better carrier education, and better wholesaling support. Advisors seem to be happy overall with the indexed annuities available. When it comes to electing riders on the indexed annuity products, LIMRA SRI found that annuities sold through banks have the lowest utilization of riders. The financial professionals believe that overall rider election could increase with more wholesaler education on their benefits, lower rider fees, increased point-of-sale support, more client awareness campaigns and new illustrative tools.

Overall, retirees and those close to retirement age see significant benefits and value from fixed indexed annuities. This is why sales have been increasing and are expected to continue on that upward trend. The financial professionals surveyed are looking for a little more support and education from the organizations producing indexed annuities. The DOL fiduciary rule poses a challenge to the indexed annuity industry, but not one that is too big to overcome. Consumers still see great value from these annuity products, even though advisors will have to change their commission structure and meet the BICE requirements.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+


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