Fiduciary Exchange, a company that runs an annuity exchange and feeds annuities into advisors' wealth management systems, is getting ready to explore a new frontier: the market for income annuities.
FIDx hopes to put single-premium immediate annuities and deferred income annuities on the exchange shelves by March 31.
A SPIA helps the contract owner convert a large cash payment into a stream of income that starts within a year or less.
A deferred income annuity creates a stream of income that starts one or more years in the future.
Rich Romano, the chief executive officer of FIDX, said last week that the company took time to add SPIA contracts and deferred income annuities partly because advisors have traditionally thought of income annuities as products that make clients' assets go away.
Today, however, given the new emphasis on making sure that retirement advisors consider every reasonable option for retirement savers, "everybody wants everything," Romano said.
What it means: FIDx tells clients and prospects, "It's easier with FIDx."
FIDx support could build momentum for income annuities, which, in the United States, have been much more popular with economic theorists than with retirement savers.
U.S. clients have traditionally been uncomfortable with the idea of paying large sums of cash for income annuities.
Economists see buying income annuities as a great, affordable way for people to use a modest retirement savings nest egg to pay for a stream of retirement income. They have written many papers wondering why U.S. income annuity sales are so low.
FIDx: FIDx runs systems that can help advisors and annuity issuers with annuity-related education and training, annuity sales and annuity contract management.
Originally, the Berwyn, Pennsylvania-based company focused on the fee-based annuity market. It later opened up to commission-based annuities, to help distribution organizations that wanted to use FIDx to handle all annuity operations, and the share of FIDx transaction volume coming from commission-based products is now in the "high teens," Romano said.
The list of companies that have invested in FIDx includes Envestnet, Global Atlantic and Prudential Financial.
FIDx announced in September that it had passed $3 billion in new transaction processing volume. In 2023, it said its platform was helping advisors manage about $50 billion in active annuity accounts.
Core products: Rising interest rates were helping the annuity issuers that use FIDx systems sell more fixed annuities, such as multi-year guaranteed annuities and fixed income annuities, but now clients seem to be more interested in variable annuities and registered index-linked annuities, Romano said.
Insurance overlay arrangements: FIDx recently began selling a product — a "contingent deferred annuity," or "insurance overlay" arrangement — that can help a retirement saver bolt what amounts to an income spigot onto an ordinary investment account.
The client gets the benefit of annuitization, but "the money no longer leaves the account and goes to the insurance company," Romano said. "There's no transfer of assets."
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