If it’s been a while — say, 10 years — since you last wrote a fixed annuity contract on a client, you would be understandably shocked at how much the process has changed over such a relatively short period of time.
It wasn’t so long ago in the grand scheme of things that a fixed annuity could be bought after filling out as little as a single page of information. There was no suitability review, no lengthy disclosure to read. Just some personal information and a check, in some cases, was enough to get you a brand new annuity contract.
Fast forward to today, and the contrast could not be more stark. The average application for a fixed-indexed annuity contract is around thirty pages, with some stretching out as long as eighty, most of that coming from lengthy disclosure statements and suitability questionnaires. And that’s a good thing.
Indexed annuities are a product surrounded by controversy. While they are a useful tool for many retirees, the commission-based sales model and product design lead to many dismissing them as a product that is “sold, not bought.” This has led to a steady increase over the last decade in regulations applying to these annuities; at one point, they were even close to being classified as a security by Rule 151A, despite not constituting an actual investment. While that effort ultimately failed, it evolved into an amendment to the Dodd-Frank Act which required that all fixed and indexed annuity sales be preceded by the agent or advisor completing a dedicated training module on that product, ostensibly to ensure that they are completely familiar with the product they are selling.
Recently, fixed annuities — indexed annuities in particular — have also been experiencing a paradigm shift in terms of who offers them. While fixed products have long been sold by a vast majority of independent, life-licensed agents, the business is increasingly moving towards the registered broker-dealer space. Not long ago, indexed annuities were practically verboten for registered representatives. Today, Raymond James, one of the largest independent BDs around, does around $650 million in indexed annuities per year, according to Scott Stolz of Raymond James Insurance Group.