Cerulli Sees In-Plan Annuity Sales Problem

Adding lifetime income spigots to 401(k) plan accounts could be a big business — if life insurers and asset managers can find spigot sellers.

Analysts at Cerulli Associates talk about the spigot seller gap this week in a new review of the marketing for adding annuitization provisions to defined contribution retirement plans.

Provisions promoting in-plan annuitization features were a key part of the Setting Every Community Up for Retirement Enhancement (Secure) Act.

Some life insurers and asset managers have announced in-plan annuitization program alliances, and many life insurers have hired high-level defined contribution plan sales managers.

But Cerulli analysts say the life insurers and asset managers still face one major, fundamental obstacle: The people who have been selling annuities are mostly different from the people who help larger defined contribution plan sponsors pick their investment menus.

Retail advisors do help about 40% of the sponsors of 401(k) plans with less than $5 million in assets, and about 31% of the plans with $5 million to $25 million in assets, but they aren’t the same kinds of retirement plan consultants who work with the plans with more than $25 million in assets, according to the Cerulli analysts.

In spite of the need to find people who can bring the worlds of annuities and big retirement plans together, 78% of insurers Cerulli surveyed said that in-plan annuity sales will grow over the next three years, and 28% predicted that in-plan annuity sales will grow at least 10%.

(Image: kan_chana/Shutterstock)