CANNEX Financial Exchanges Ltd. provides some of the information rivers that make the U.S. annuity industry work.
Ten years ago, the Toronto-based company was known for its single-premium immediate annuity exchange.
Over the years, the company has broadened its scope. It now offers data streams that can help annuity makers, distributors, buyers and others understand the prices, features, and benefits-adjusted value of a wide variety of retirement savings and retirement income products.
(Related: 3 Must-Ask Questions for Annuity Clients)
Gary Baker, the president of the CANNEX USA unit, and Tamiko Toland, the unit’s head of annuity research, came to ThinkAdvisor’s offices recently to talk about what they’re seeing from their position as annuity information river managers.
Here are five insights they shared during the interview.
1. The annuity distribution pipes have shrunk.
The number of client-facing advisors is smaller than it was 10 years ago, and so is the number of advisor-facing distributors, Baker said.
“There’s a much smaller group of wholesalers,” Baker said. “And the role of the wholesaler has changed.”
The advisors still selling annuities have less time to have general conversations about annuities, he said.
The wholesalers still in the market are maintaining their connections with the retail advisors by providing more support and market intelligence, Baker said.
Baker said he thinks the decline began years before the U.S. Department of Labor’s fiduciary rule project took off, in the wake of the Great Recession.
2. The thinking behind the DOL fiduciary rule is probably here to stay.
The department has put off applying key implementation guidelines for at least 18 months, but it let the “best interest” standard, or the idea that a retirement advisor should put the client’s interests first, take effect June 9.
Tamiko Toland (Photo: CANNEX)
Whether the DOL ends up in charge of annuity sales standards, or other state or federal agencies are in charge, once the idea of a best interest standard is out there, “it’s very difficult for companies to say, ‘We’re not going to adhere to that,’” Baker said.
3. Regulatory silos continue to create challenges for the annuity sector.
The agencies that oversee annuities are responsive and running smoothly, but each has its own area of interest, and that can cause problems for the issuer of a product that relates to insurance, investment products and retirement plans all at the same time, Baker said.
4. Many annuity market players still focus solely on explicit charges, without paying much, if any, attention to the value of a contract’s benefits.
In the health insurance market, designers of the Affordable Care Act public exchange program have introduced non-actuaries to the concept of “actuarial value,” or estimates of how much benefits value a health insurance policy will provide per premium buck.
CANNEX tries to do something similar, by calculating the value of a contract’s features and providing a contract actuarial value estimate.
“It’s not all about the price,” Toland said.
From Toland’s perspective, ignoring the actuarial value a contract’s issuer has promised to provide, and looking solely at the explicit charges, is as foolish as looking solely at the monthly premium for health insurance policy, and not at the deductible.
5. Annuity market players still need simpler contract comparison tools.
CANNEX now provides contract data in a structured format that promotes apples-to-apples comparisons, Toland said.
But even the CANNEX contract analyses are still fairly long, Toland said.
CANNEX is trying to develop a shorter “milk carton nutrition label” for annuity contracts that can help a consumer or advisor understand, quickly, how a contract compares with other contracts in the market based on a number of different dimensions, Toland said.
— Read Annuity Prospects May Prefer General Value Message on ThinkAdvisor.