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Confidence high in indexed annuity products

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Confidence in indexed annuity products is strong and financial professionals are optimistic about continued growth in sales of indexed annuities, according to a survey conducted by Saybrus Partners Inc.

The survey polled financial professionals at the 2016 Bank Insurance & Securities Association convention in March in Hollywood, Fla. Eighty-three percent of those surveyed expect indexed annuities sales to increase during the next year, and more than half expect sales to grow more than 10 percent.

The findings mirror data from LIMRA Secure Retirement Institute released earlier this year that found fixed indexed annuity sales grew 13 percent last year to a record high of $54.4 billion.

“Indexed annuities offer strong consumer value because they offer protection from market losses, strong lifetime income guarantees and solutions that address multiple risks,” said Ed Friderici, managing director of Saybrus Partners, an insurance partnership firm. “Fees also tend to be lower on these products than other options.”

Indexed annuities led sales volume growth among respondents. Forty-three percent said indexed annuities have shown the most sales growth in their practice, while 20 percent cited life insurance, 16 percent said managed accounts, 11 percent said advisory services and actively managed portfolios, 7 percent said variable annuities, and 2 percent said mutual funds.

During times of economic downturn, financial professionals may favor indexed annuities over other products they could offer their clients, according to the survey. Fifty-four percent of respondents said indexed annuities are the most important product to offer during a correction or bear market, followed by advisory services and actively managed portfolios (16 percent), life insurance (12 percent), variable annuities (8 percent), managed accounts (7 percent) and mutual funds (2 percent).

“Our survey found over half of financial professionals think indexed annuities are the most important product to offer clients in a correction or bear market, which speaks especially to the downside protection and guaranteed income they offer,” said Friderici. “Even in the current economic environment, these features are attractive for clients who are transitioning from an accumulation phase and into retirement. I view indexed annuities as comprehensively competitive because they can provide a full range of benefits with one product, from accumulation potential with principal protection to guarantees of income, legacy and extended care planning.”

To help close sales, financial professionals are looking for better point-of-sale support (19 percent), multisolution products (17 percent), better technology (16 percent), better carrier education (15 percent) and better wholesaling support (15 percent).

“This data indicates that financial professionals are mostly satisfied with the indexed annuities available in the marketplace but are looking for enhanced sales support, whether behind the scenes or directly with clients,” Friderici said. “We know this to be particularly true for advisors who are new to indexed annuities.”

Increasing usage of riders on indexed annuities could be improved with better wholesaler/advisor education on rider benefits (37 percent), decreasing rider fees (18 percent), point-of-sale support (16 percent), client-focused awareness campaigns (13%) and better illustrative tools (13 percent), according to the sturdy.

The poll was conducted prior to the release of the DOL’s new fiduciary rule, which is expected to increase compliance standards for fixed indexed annuities.

“We certainly expect the DOL ruling will have an impact on indexed annuities, but at this point we can’t say what that will be,” said Friderici. “Whatever changes may come out of the new rules, the aforementioned value proposition for indexed annuities to meet consumer needs remains unchanged.”

The survey polled 104 financial professionals, including bank executives, program managers, professionals affiliated with insurance companies, independent brokers and dealers, registered investment advisors, bank financial advisors and professionals affiliated with a national wirehouse.

See also:

Final fiduciary rule: the benefits and burdens for indexed annuities

Reaping the tax benefits of annuities

FIA sales spotlighted in DOL rule

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