While the environment last year may have been a bit rough for annuity advisors and carriers, things are looking up for the industry.
LIMRA Secure Retirement Institute (LIMRA SRI) recently released a three-year annuity sales forecast, and it’s one many advisors will likely be happy to see.
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What’s the Forecast for Annuity Sales?
According to LIMRA SRI’s projection, the industry can expect to see total annuity sales increase five to 10 percent in 2018 and up to five percent in 2019. The following year, annuity sales will likely remain flat.
Fixed-rate deferred annuity sales seem most likely to see the highest growth rates over the next two years. We could see them rise a whopping 15 to 20 percent this year and 20 to 25 percent in 2019, according to the report.
LIMRA SRI states its 2018-19 growth projections are a result of improved economic and regulatory conditions. The SEC’s proposed best interest rule and market volatility may stunt growth in 2020.
Why the Positive Outlook?
As mentioned by LIMRA SRI, the improved regulatory and economic environments should favor annuity sales. New entrants and developments in the annuity industry should also help sales spike. Let’s take a closer look at what’s changing and why that’s good news for annuity agents and advisors.
The Demise of the Fiduciary Rule
Improved regulatory conditions almost certainly means the demise of the fiduciary rule. The government had until June 13 to ask the U.S. Supreme Court to reconsider the 5th U.S. Circuit Court of Appeals’ decision to vacate the rule, but didn’t take any action. The Court issued a mandate on June 21 making its decision effective, bringing the rule to an end.
The fiduciary rule sought to amend the Employee Retirement Income Security Act (ERISA). In essence, it holds those who offer retirement planning advice accountable to a higher (“fiduciary”) standard than the (“suitability”) standard they had to follow before.
With the rule in place, consultants, advisors, and agents have to take certain steps to ensure compliance and that they’re acting within the best interests of their clients. Without it, that’s not (legally) the case. Though, many carriers and agencies have already implemented new processes and measures that they may still require you to adhere by.
Growing Interest Rates
In 2008, interest rates plummeted. This year, we’re seeing the Federal Reserve raise them the highest they’ve been since then. In fact, on September 26 the Federal Reserve raised rates for the third time in 2018. Economists also believe we’ll see three rate hikes during 2019 and one increase in 2020.
Rising interest rates are good for the annuity industry because they motivate carriers to increase the interest caps on their fixed and indexed policies. Higher caps make these products more attractive for consumers, making it easier for you to find and convert new annuity leads.
New Carriers and Products
New carriers entering the annuity market and the development of new types of annuities will also continue to help the market to grow. For example, fixed indexed annuity carriers are creating new ways of crediting interest, such as customized and uncapped policies. The guaranteed living withdrawal benefit rider has also proven to be an attractive feature with fixed indexed policies.
How Can You Maximize Your Success?
The fiduciary rule may be gone, but it’s unlikely it will be forgotten.
Regulators and investors have an increased awareness of the issues at hand. We could see a stricter reading of ERISA’s Five-Part Test. Further, we could see the implementation of the SEC’s proposed advice rule.
To maximize your success selling annuities this year, we recommend knowing your carriers’ and agencies’ guidelines and processes for sales. Continue to keep good records. Also, consider partnering with an FMO, like Ritter Insurance Marketing, to connect with dedicated annuity experts and stay up to date on the newest available products and what’s hot in your local market.
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Annuities are here to stay as a good investment option and income solution for your clients. Right now, you have a tremendous opportunity to capitalize on this market as it flourishes. Our advice: take advantage of it, especially while the going’s good, and if you need more assistance, reach out! There are experts around who are ready and willing to chat with you about what exactly you need to do to follow the rules and enjoy more business.
Want to chat with an expert about how you can sell more annuities or what you should do to stay compliant? Send us a message.