The Annuity Market Takes a Hit but Could Make a Big Return: BLOG
March 17, 2018 by Lynn White
(Newswire.net — March 17, 2018) — Fee-based annuities are considered vital for attracting RIAs or registered investment advisors. During 2017, fee-based variable and indexed annuities experienced sales of $2.3 billion. That equates to roughly 3% of all variable and indexed annuity sales during that specific year. During the same year, fee-based variable annuity sales were $2.2 billion. Yet, they are still only 2.7% of all variable annuity sales during that year.
A Debate Rages
Last year, fee-based indexed annuities only generated $138 million in sales. These numbers have brought a lot of questions. There is a debate as to how much traction certain types of annuities can generate. Some believe that fee-based annuities may never be able to live up to the hype. Others believe it is only a matter of time, before they gain steam. Nevertheless, insurance company managers have good news. They claim that registered investment advisors, who would normally shy away from annuities, are beginning to show more interest in the fee-based annuities.
RIA Interest
One thing that has brought more interest to the market is improved reporting capabilities. This helps to shed more transparency on annuities. It has also helped to provide more reassurance to RIAs. When the interest rates rise, RIAs should begin paying more attention to fee-based annuities, according to many insurance company managers. Anyone looking to sell my annuity for cash can generally find a reliable RIA without too much trouble.
During 2017, annuity sales dropped as much as 8% from the 2016 numbers. Many blame low interest rates and uncertainty for the downturn. This is a trend that is expected to continue well into the future. The fiduciary rule implemented by the Department of Labor is also to blame. The good news is that many market analysts believe that the DOL rule is a thing of the past and the annuity market may be moving on soon.
Future Forecasts
There is some good and bad news for annuities in the upcoming year. Variable annuity sales fell 9% from the previous year. However, they’re expected to drop less in 2018. They’re expected to be flat to 5% in 2018. FIA sales are actually expected to rise. FIA sales dipped 5% in 2017. However, it is believed that they could rise as much as 5 or 10% in 2018. This is definitely good news.
Prudential Pulls Out
Recent news has also shaken up the annuity market. Prudential has announced that it would be splitting in half. The company has the intention of selling its annuity arm. The company’s 12-billion-pound annuity book has roughly 40,000 policyholders. The company intends to sell its annuity book to Rothesay Life, which is an insurance consolidator. After the news was announced, Prudential’s shares climbed to the top of the FTSE index. Unfortunately, this might be bad news for those in the annuity market. If Prudential is willing to pull out, what will come next? Only time will tell.
