2015 is just about over, and with the New Year about to begin, there’s no better time for a quick look back at fixed indexed annuity (FIA) changes, challenges and growth over the past 12 months—and ahead at what the industry can likely expect in 2016.
Jim Poolman, executive director of Indexed Annuity Leadership Council (IALC), weighed in on the current state of FIAs, and looks ahead to the coming year.
Q. Did the industry see an uptick in fixed indexed annuities acceptance and growth in 2015?
Jim Poolman: The industry grew significantly in 2015 as the FIA market continues to become a more mainstream product than it has been in the past. The FIA has become a go-to product for Baby Boomers, who are typically financially conservative by nature and looking to keep their money safe. However, they’re also concerned that they’ll outlive their assets and they’re looking for a guaranteed income stream. That’s why we’re continuing to see sales of FIA products increase, because they can be designed with guaranteed income riders so folks know exactly what they’re going to get, and this product ensures that they won’t outlive their income. At the same time, Millennials are beginning to save for retirement. This group is generally distrustful of the financial markets. They have lived through the recession and perhaps seen parents and grandparents lose a significant portion of their retirement savings through the stock market when they were about to retire. Because FIAs ensure that invested principal is secure, this product is becoming more acceptable to younger folks like Millennials, as well as Gen X and Gen Y, as they plan for retirement.
Q. What are the challenges for FIAs going into 2016?
Poolman: In 2016, the pending Department of Labor (DOL) fiduciary rule could change the competitive landscape and distribution of the FIA product. Right now, it’s an unknown threat. We expect the DOL rule to come out in the first quarter of 2016 and although we don’t know exactly what that rule will look like, we do know that it will affect product distribution.
Q. Is the industry prepared to deal with potential changes?
Jim Poolman: I believe that as an industry, we will come out of this DOL rulemaking process prepared and ready to comply with whatever changes the DOL makes. The FIA industry will be very proactive in making sure we have taken the proper steps to comply with the rule, assuming there are necessary clarifications. The IALC has been very proactive in making thoughtful suggestions to clarify the rule so we can have a clear path to compliance and know exactly what rules we need to play by. We are advocating to keep our distribution in tact so we can give as many choices to consumers as possible.
Q. What steps can the industry take to boost FIA sales in 2016?
Poolman: Educating both agents and consumers about the product continues to be an ongoing and necessary opportunity. There are so many competing products in the marketplace and many consumers aren’t aware of our products. Companies also must focus on agent training to ensure that members of the field force who interface with the average citizen know what they’re talking about. Companies need to be responsible for educating their producers about the best uses of our product.
Q. What will be areas of focus for the IALC in 2016?
Poolman: Educating consumers is an important part of the IALC’s mission. In the coming year, we will release factual information about FIAs in general, and we’ll educate the media, regulators and public policy makers about the benefits of FIAs. We also plan to do surveys to see how the general marketplace feels about the product specifically, or to gauge attitudes about retirement planning for different market segments. 2015 was an incredibly successful year for the FIA and we see this only improving in 2016. Taking the opportunity to educate people about the product will only better position us for the future.