Financial advisors are an indispensable repository of investment and retirement information, not to mention a gateway to a wide variety of different financial products.

Despite this, three-fourths of American households do not have a personal financial advisor, according to a recent LIMRA study. However, most households have established a financial services relationship–with their banks.

What’s more, consumers are increasingly turning to their local banks for the convenience and credibility of savings and retirement planning advice. This advice now often includes annuity solutions, usually traditional fixed annuities, but in recent years, variable annuities too.

In view of these trends, banks are re-examining their current annuity offerings and annuity carrier relationships. They are looking for new ways to reinvigorate sales.

This poses the question: When banks evaluate carrier lineups, which annuity distribution players will stay in the game?

The question applies to evaluations by third-party marketers (TPMs), too. The TPMs came onto the banking scene in the 1980s, aiming to help bridge the gap between banks and insurance using their relationships with insurance companies that some banks could not have at the time. Today, TPMs work directly with many bank representatives to determine bank client needs and position FA offerings, including fixed index annuities, and essentially influence annuity selection at many community banks.

The relationship of the banks and TPMs, and the criteria they use for selecting annuity distribution players, sheds light on the potential future of annuity players in the bank distribution channel. Data on this emerged from a recent telephone survey of 32 banks and TPMs, representing over 82% of annuity industry sales through banks in 2005. The survey was conducted by Dr. Kenneth Kehrer, a director of Kehrer-LIMRA, and commissioned by ING U.S. Financial Services.

One finding: Average banks and TPMs have annuity selling agreements with 21 annuity providers, with a range from 5 to 40 selling agreements. However, TPMs work with even more carriers, on average, than banks.

In fact, TPMs work with an average of 19 actively sold carriers versus 11 actively sold carriers for larger banks.

Keep in mind that banks do not necessarily sell annuities from all insurance companies that have selling agreements with them. Some relationships result from annuity products the bank formerly sold actively but which the bank now only services for clients who had invested in those products earlier.

Worth noting: Of the banks and TPMs that participated in this survey, 53% indicated they plan to maintain their current carrier relationships, 25% intend to reduce their number of carrier relationships, and the rest will increase their number of carrier relationships.

The number of current carrier relationships also appears to influence the firms’ plans to “rightsize” carrier relationships. Specifically, distributors with a relatively large number of carrier relationships were looking to downsize, and vice versa. Compared to banks, TPMs are more likely to maintain their current carrier relationships; only 20% of TPMs plan to reduce their number of carrier relationships.

So, how will almost half of banks and TPMs make decisions about which annuity distribution players will be in the game and which will sit on the bench?

Kehrer uncovered a number of criteria for selecting the carrier. See the charts for how banks and TPMs differ in their selection criteria.

Banks and TPMs ranked “financial strength” as most important for determining which annuity distribution players they actively sell. This criterion scored an average ranking of 4.40 on a 1 to 5 scale. In second place was “commitment to bank distribution,” with an average ranking of 4.22.

The TPM responses do differ from those of banks. For example, TPMs are much more likely to consider product breadth (3.60 to 3.10) and wholesaling support (4.40 to 3.90) than are banks.

In sum, over half of banks and TPMs are generally satisfied with the number of relationships they have. But the rest plan to increase or decrease their number of annuity carrier relationships, depending on number of relationships they currently maintain.

The takeaway for the insurance industry: To stay in the game and to serve the growing number of boomers who are relying on established bank relationships for retirement planning advice, carriers must remain sensitive to the selection criteria of these banks and TPMs. Annuity distribution through banks offers plenty of potential for annuity providers who keep their ear to the ground.