Variable annuities aren’t the only annuity variety undergoing major changes after the DOL fiduciary rule was finalized. Fixed Index annuity insurers are also developing fee-based products, just like their variable annuity counterparts. Investment News’ Greg Iacurci talks about the new products in “Insurers developing fee-based fixed-indexed annuities post-DOL fiduciary rule.” Four of the first quarter’s top ten fixed indexed annuity sellers are already developing fee-based indexed annuity products. Allianz Life, Voya, Symetra and Lincoln Financial could have their products available to the market by the end of this year. During the first quarter of this year, these companies were numbers 1, 8, 9, and 10 in sales of fixed indexed annuities, according to Wink, Inc.’s research.
This is monumental in the fixed indexed annuity industry because only one insurance company has developed a fee-based indexed annuity in the past. Midland National’s fee-based product, the MNL Prosper 5, has been around since December of last year which is even before the Department of Labor included fixed indexed annuity products in their best interest contract exemption (BICE). Midland National wasn’t the only company that had considered these fee-based indexed annuities in the past though, Allianz and Symetra both had working plans previously. But now that commission-based indexed and variable annuities will be riskier to sell, fee-based annuities just make more sense and are desirable to distributors. These products have grown in sales eight years in a row and had their highest sales ever in 2015. Some experts are worried for the future of indexed and variable annuities, but fee-based products could be the wave of the future for both types of annuity products.
Lincoln is the only company that has the details of their fee-based FIA settled upon. They said that it will have an optional living benefit rider and that it has been specifically designed for the RIA channel. The other three companies think that their annuities will offer an optional living benefit rider as well because this option has been so popular with commission-based fixed indexed annuities. Symetra plans to offer a suite of these fee-based products eventually, similar to the choices they have had with their commission-based products. Some of the companies plan to base their products off of other annuity models they sell, while others do not. Midland National’s fee-based FIA is not based on other annuity types they sell. It has a five year surrender period and an optional living benefit rider. Expect the fees and contract charges for fee-based fixed indexed annuities to be similar in structure to recently introduced fee-based variable annuities.
The first new product to hit the market will probably be Lincoln’s fee-based FIA. The company also plans to develop a product specifically for the broker-dealer channel. Allianz will launch their new indexed annuity early next year before the DOL fiduciary rule takes effect. The company said they will determine their fee-based future after they see what happens with demand in the markets after the rule. Symetra will probably launch their new product this year while Voya isn’t yet sure when theirs will be finalized. Both variable and fixed indexed annuity providers are trying to read the markets with their introduction of fee-based products. Fee-based varieties are likely to increase in popularity because of the DOL fiduciary rule, but that doesn’t mean that commission-based products will go away. Many distribution partners plan to use BICE and continue selling commission-based products as well. Four companies will be introducing fee-based fixed indexed annuities over the next year to meet the newest demand from distribution channels.
Written by Rachel Summit