Automation and standardization will be the keys to success for advisors and broker-dealers who handle annuities for retirees in the near future, say experts from The Depository Trust & Clearing Corporation (DTCC), based in New York City.
A surprising amount of work is still done by paper and it may take a push from outside the industry to change that, says Adam Bryan, DTCC managing director of insurance and retirement services. That push could be forthcoming in the state and federal regulation changes that are to be considered in the coming months. DTCC provides money settlement and information services for the financial industry.
The challenges presented by regulation changes and a need to increase the use of technology can also provide opportunities for retirement planners willing to automate in order to handle their business more efficiently and attract more clients, says Bryan, who led a recent press conference on the challenges facing the insurance and retirement industry.
Bryan says the insurance industry will respond with new products as the regulations take effect, although he says he does not know what those products might be as yet.
"We are entering a new phase for retirement planning, and we need to see how the insurance industry adapts to provide new products or to leverage existing products," Bryan says, "but we do know that broker-dealers have come to us saying annuities insurance is very paper-intensive and very expensive to process. At the same time, broker-dealers are experiencing intense pressure to keep budgets down."
The net flow of investment of annuities within IRAs increased by $26.9 billion in 2008 and the net flow is predicted to be $30 billion by the end of 2009. The net flow is predicted to increase to $45 billion by the end of 2010 for an asset level of $510 billion.
A recent survey by Aite Group, a financial services industry consultant, of 400 investment advisors shows "the tax deferrals for annuities in IRAs are irrelevant. It is the security that investors want and that is a big, big shift in attitude," says Doug Dannemiller, Aite senior analyst who participated in the press conference. Aite is a financial services industry consultant.
Nearly a third of the investment managers recently surveyed by Aite predict the changes that will be demanded of them will provide greater transparency, lower costs and move the industry forward.
"A broker-dealer that can make it easier for representatives to process their work by automating more of it will be more competitive in attracting new employees," says Doug Dannemiller, senior analyst at Aite Group, a consulting organization for the financial industry, who participated in the press conference.