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Going Independent

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What You Need to Know

  • More than 15% of a typical advisor’s client assets are held in annuities.
  • Using an open-source annuity can solve product comparison problems.
  • One challenge is to keep track of all of the annuity features and riders.

Many advisors hesitate to make a major move to true independence because of the Herculean effort required to execute such a transition successfully. After the ACAT of IRAs, taxable brokerage accounts and the numerous investment accounts that clients may have, transitioning client assets to your new independent RIA is a feat in itself.

Not to mention the potential attrition; on average, almost one-fifth (19%) of client assets are lost when advisors move firms, according to a recent survey conducted by research and consulting firm Cerulli Associates.

Losing some clients is a likely byproduct of going independent, but now you no longer have to automatically leave your annuity assets behind. Traditionally, it hasn’t been easy or even possible for advisors to bring annuity assets over to their new firm; a dearth of advisory options, few fiduciary annuity platform partners, and lack of tech integrations made this nearly impossible.

Times are different now. Newly-available data integrations with wealth management platforms like Orion, BlueLeaf, and others provide access to view annuity assets and report on them. So, while it might be a daunting thought, there are successful strategies to overcome the client annuity transition challenge.

When one chooses to leave their broker-dealer and transition their client assets to their new RIA firm, there are a number of questions to consider. Do they leave annuity assets at their former broker-dealer? Pursue becoming a broker-dealer themselves? Become a hybrid? Get dually registered?

How each advisor answers these questions will no doubt impact their existing client relationships. No matter what, advisors who want to breakaway must address the 15% to 25% of assets that were held in client annuities. From a regulatory perspective, RIAs aren’t permitted to make annuity recommendations. But what does that mean for annuities already owned by clients or prospective clients? Is it possible for independent RIAs to advise on them like other assets under management? In many situations, the answer is “yes, with the help of a licensed partner,” and they should. Assuming client annuities cannot transfer, and therefore ignoring them in transition, is a big mistake.

There are three key steps an advisor can take to tackle the annuity transfer challenge, head-on.

  1. Partner with an open-source annuity platform to review products and identify the best options for clients
  2. Collaborate with an annuity partner to become the agent of record on the annuity assets that couldn’t be transitioned. Changing over this block of annuities will allow an advisor report on them and include on client statements.
  3. This will put an RIA in an ideal position to transition those to advisory solutions when they come out of surrender periods.

When it comes to annuities, there are always new enhancements coming out. There are constantly new living benefits, living riders or income benefits that change. When reviewing an existing product, this allows an advisor to transfer a client’s annuity if they find a product that is a better fit. As an advisor, there is immense importance in adhering to your fiduciary oath and maintaining trust with your clients who take comfort in knowing that you have all of their assets accounted for and under your watch.

Offering annuities via a fiduciary approach toward managing clients’ financial lives can be a valuable strategy to help identify a better solution for their income needs. With portfolios consisting of mutual funds, low-cost index funds, ETFs, fixed index annuities, and fixed annuities, an independent RIA can rely on their open-source fiduciary insurance and annuity platform partner to refer appropriate annuity solutions for clients.

While the road to independence can be fraught with hardship, don’t just assume that you must leave your clients’ annuities behind. When the time comes, remember that annuities can further empower you to provide better service to your clients throughout your transition to independence.


Kevin Hissong and Lotay Yang Kevin Hissong is director, strategic business development, at RetireOne. Lotay Yang, CFP, is the founder and CEO of Black Card Circle and the Black Card Circle Registered Investment Advisor (RIA) firm.

(Image: Nomad_Soul/Shutterstock)