Thursday, March 15, 2018

FIA Sales Positioned for Rebound

Fixed index annuity sales are expected to rise in 2018, according to LIMRA as reported by InsuranceNewsNet,[1] on the news of an anticipated, now confirmed, delay of the applicability dates for full compliance with the Department of Labor fiduciary rule. As you will recall, parts of the rule involving reasonable compensation and impartial conduct standards went into effect on June 9, 2017. President Trump since taking office has sought a full scale review because the regulation may not be consistent with the policies of his administration. As a result of industry projections, LIMRA revised their forecast on 2018 FIA sales in spring of 2017 from being down 15-20% to actually growing by 5-10%[2] in fall of 2017.

At Ann Arbor Annuity Exchange, we are also predicting an increase in FIA sales. The rise in awareness by registered representatives (RRs) and investment advisor representatives (IARs) of the unique features and guarantees of FIAs has helped drive FIA sales to a series of record-breaking years. It looks as if 2017 will buck the trend and be the first year in several not to set a record for sales. This could be due to all the uncertainty surrounding the fiduciary rule earlier in the year, or for a host of other reasons, including all-time highs in the stock market.

On March 2, 2009, the S&P 500 finally reached its bottom of 683.38 after what has become known as the “Great Recession”.[3] Since then, the S&P 500 has experienced one of the longest bull runs in the history of the market. At the time of this writing it is knocking on the door of 2600. That is just over fourfold growth in 8½ years. At the same time, inflation has remained low and interest rates have remained very low. All of this has led to the U.S. markets being at all-time highs. But, what goes up must eventually come down…

Exactly when that is going to happen is for people much smarter than me to ponder. I am not certain when the correction will come or how much it will correct. I am only certain that, at some point, there will be one. And a fixed index annuity (FIA) could be a great place to earn competitive interest rates and protect from market losses when the correction arrives. Does this mean you should recommend your clients put all their money in FIAs? No, it does not. However, it could make sense for a portion of their funds to help cover expenses in retirement.

It makes a lot of sense for financial professionals (FPs) to consider recommending FIAs as part of a client’s overall portfolio. Not only is the potential for accumulation competitive, but FIAs continue to be a great solution for lifetime income that cannot be outlived. As more of the population enters retirement, the need for guaranteed* income is only expected to rise. Over the last several years, FIAs have shown they can deliver lifetime income competitively for cost-minded consumers very efficiently.

The time has never been better. Recent FIA product development has been heavily influenced by the DOL rule. In particular, several carriers have launched fee-based FIAs, anticipating a move away from commissionable products. Also, for commission products that remain, many think the end result of the rule may lead to lower commissions. At this point the vast majority of FIA sales are still of products that pay commissions. Nevertheless, , it is reasonable to expect the DOL rule would spur further product development and bring further changes to compensation arrangements once the full compliance date begins to apply.

While nobody has a crystal ball, AAAE believes that 2018 should see strong results for FIA sales. The fundamental reasons for buying FIAs – principal protection and lifetime income – continue to be in high demand. If you would like to speak with a marketer about FIAs, please call us at 800.321.3924.

Heath Waddington | Senior Vice President of Sales & Marketing
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x140 | Dir: 734.786.6140

*Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance carrier.

[1] Cyril Touhy, DOL Rule Delay Expected to Fuel 2018 Annuity Sales Spike. InsuranceNewsNet. Web. 10/18/2017 accessed 11/14/2017 at
[2] See note 1
[3] Yahoo Finance. Web. Accessed 11/14/17 at^GSPC

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