Insurance companies have been launching a barrage of annuities, new commission structures and platforms-aimed directly at fee-based and fee-only advisors.
It could be starting to have an impact.
Ten years ago, Steve Gaito, a Raleigh, N.C.-based fee-only CFP licensee, wouldn't have given an annuity the time of day-"mainly because they didn't have living benefit features," he says. "It was trying to be sold like a mutual fund investment with a few guarantees.
"Now," Gaito says, "it really is an appropriate investment for someone who has a retirement income need. It almost replaces the old traditional pension."
Gaito's comments come amid a series of due diligence meetings with his broker-dealer, LPL Financial in Boston, which recently announced a variable annuity platform for fee advisors. Although Gaito charges clients an hourly fee, the LPL Financial platform aims to make it easier for advisors who charge a fee for assets under management to include variable annuities-a new but important growing trend.
It also is expected to aid advisors in reviewing a client's annuity assets alongside other investment assets. Gaito still doesn't consider annuities the "greatest investment known to mankind," but he likes the fact that new LPL offerings come with no surrender fees. He especially likes the tax-deferred variable annuity offered by the U.S. business group of Sun Life Financial in Wellesley, Mass., because it comes with inflation protection built in. "I really think it's a home run!" he says.
Fee-only and fee-based advisors are an important target for annuity business growth. In 2010, according to Cerulli Associates in Boston, insurers estimated that just 6% of their sales came from registered investment advisors-the lowest of any distribution channel.
But as more insurance agents and registered reps become fee-based advisors, insurers are taking dead aim. New products and platforms seek to snare even anti-annuity fee-only advisors-like Ray Mignone of Little Neck, N.Y.
"In most cases, I don't believe in annuities," Mignone declares. "If [clients] already have annuities, we try to get them [if the surrender period has expired] into a lower-cost annuity at TIAA-CREF or Vanguard."
Traditionally, TIAA-CREF in New York, and Vanguard Group in Valley Forge, Pa., have stuck with simple low-fee annuities with no surrender fees. They have shunned complex gizmos like guaranteed lifetime withdrawal benefits. But that soon may change.