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2011 outlook on fixed index annuities

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As you’re wrapping up your 2010 sales and gearing up for the holidays, most of you are done for the year and already planning your strategy for 2011. A growing number of our readers pin their success on how well they do with their number one product–fixed-index annuities.

Contributing writer David Port has been researching the FIA market and come up with some pretty interesting findings for the coming year. Below, I’ve included highlights from a major piece that will appear next year in Senior Market Advisor.


The sales story: A report from Beacon Research, claims FIAs now represent a record 44 percent share of fixed annuity sales. Third-quarter 2010 indexed annuity sales reached $8.6 billion, their second consecutive quarterly eight-year high. FIA sales were up 17 percent in third quarter 2010, compared to the same period of 2009, while most other annuity products lost ground.

Head-to-head versus variable annuities: While FIAs can’t rival variable annuities in terms of overall market share (despite record FIA sales levels, variable annuities still easily outpaced their indexed counterparts in the third quarter of 2010, $34.9 billion to $8.6 billion), competition between the two product types clearly is escalating. Indeed, the emergence of “better [indexed annuity] products with better consumer value” is making insurers, marketers and advisors alike take notice, says annuity expert Garth Bernard, founder and CEO of the Sharper Financial Group in Boston.

“There’s no reason why advisors who sell variable annuities with income riders should not and would not take a look at indexed annuities with the same income riders,” Bernard says.

Why? For one, the fees for those income guarantee riders on FIAs are “massively lower” than those of similar VA riders, Bernard says. What’s more, he says, FIAs, unlike VAs, offer built-in principal-protection.

“And you don’t have to be securities-licensed to sell them, which can save a lot of red tape,” Bernard says.

Nowadays, says William E. Kauffman, Jr., CLU, ChFC, LLIF, director of marketing for life and annuities at Senior Market Sales in Omaha, Neb., the combination of downside protection and upside potential offered by the FIA resonates more with many annuity shoppers than does the pairing of greater upside potential and greater downside risk found with a variable annuity. Factor in the emergence of reasonably priced VA-like income guarantees on indexed products, plus the U.S. government’s decision not to regulate FIAs as a security, and it’s clear why independent marketing organizations, such as Kauffman’s, are urging their advisors to put a greater emphasis on FIAs.


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