Annuity Sales Just Keep Breaking Records

There’s an old adage that annuities are sold, not bought … and boy, are sales up. 

US annuities hit a record $123.9 billion in sales in the second quarter, up 4% from last year, according to trade group LIMRA. It marks the 11th consecutive quarter of sales over $100 billion. An aging, pension-less generation is creating ever more customers, in addition to high market volatility, rising rates and more specific products that can be tailored to a client’s needs. Advisors shouldn’t expect momentum to slow down any time soon. “It’s the perfect storm of why you’re seeing large growth in the annuity space,” said David Byrnes, chief distribution officer at Security Benefit. 

Slicing and Dicing

Today’s annuities let advisors do a lot more to solve specific client problems, said James Comblo, a partner at Prosperity Capital Advisors. “I kind of think of it like a butcher versus a surgeon. A butcher just kind of goes in and hacks away at the meat, and you get a steak at the end. Whereas a surgeon can go in and pick out specific things that they want from that piece of meat, and give you exactly what you’re looking for.”

Here’s a breakdown by category, according to LIMRA: 

• Fixed-rate deferred annuities had the highest sales volume of any category, at $44.7 billion, followed by fixed indexed annuities at $30.7 billion. 
• Registered index-linked annuity (RILA) sales hit a record $23.3 billion, up 22% from last year, and posted their second-highest sales month ever in June.

RILAs have drawn more interest as investors seek a middle ground between equity exposure and risk amidst strong but volatile markets, Comblo said. They “give you a lot of flexibility to still get market appreciation, but also give you different protections on the downside,” he said. 

Com-Mission Impossible. Annuities can get a bad rap for heavy operating expenses, often tied to a salesperson’s commission. “The answer for why annuities keep growing in sales numbers is directly tied to the amount of compensation financial advisors receive,” said Byrke Sestok, a CFP with Moneco Advisors. 

But the perception that fiduciaries make the best advisors, since they earn more as a client’s assets grow, may not hold up in retirement, said Tamiko Toland, founder of the consulting firm 401(k) Annuity Hub. “That’s great while you’re growing your assets, but once you’re in retirement, you need to spend that money,” she said.