Annuity Sales Continue to Shatter Records in Q3

Love them or hate them, annuities are on a roll.

While they may not top every advisor’s priority list, the insurance products keep smashing quarterly sales records. US annuity sales hit nearly $120 billion in the third quarter, according to trade group LIMRA. That marked the eighth straight quarter above $100 billion, bringing year-to-date totals to $345 billion, up 4% year over year. It’s the highest total ever recorded in a nine-month period, and reflects a growing shift among advisors who are rethinking the old adage that annuities are sold, not bought.

“We’re at a place where some advisors use them much more than they should, and others who should use them never do,” said David Blanchett, head of retirement research at PGIM. “You often need other solutions beyond just a portfolio to solve retirement.”

A-Whole-Nnuity World

Volatility, higher rates and strong equity growth, along with clients’ retirement worries, are creating a favorable backdrop for annuities, particularly registered index-linked products that currently offer “attractive” caps, LIMRA found. Advisors seem to be coming around on annuities: 

• Half of advisors are increasing client allocations to annuities, according to LIMRA data published this summer.
• Fee-based annuities have helped reduce conflicts of interests and the sales incentives often associated with traditional commission-based annuities.

Fundamentally, annuities provide guaranteed income in retirement, often with principal protection against market losses. Still, they come with caveats like potentially high fees, limited liquidity, capped returns and added complexity compared with mutual funds or ETFs. And they’re not all created equal.

Like any investment, due diligence is key, said David Lau, founder of DPL Financial Partners, a commission-free annuity platform. “There are really crappy mutual funds and terrible ETFs,” he said. “There are bad products everywhere, but that doesn’t mean you should dismiss them as a category.”

Take the Good, Take the Bad

Many advisors still view annuities skeptically. “Annuities aren’t a retirement plan; they’re a sales strategy with a glossy wrapper,” said Mark Stancato, founder of VIP Wealth Advisors. “Record sales don’t prove investors are getting smarter; they prove fear still sells.”

Others, however, are taking a more pragmatic stance. “Just like any tool, if you misuse it, you’ll have a bad experience,” said Ashton Lawrence, a CFP at Mariner Wealth Advisors. “You can have the best spatula for flipping pancakes, but if you try to build a chair with it, you’ll think it’s awful.” Used thoughtfully for managing longevity risk or adding certainty, annuities can play a valuable role in a retirement plan, he said.