Amid the uproar over changing fiduciary regulations, the volatility of annuities sales and the introduction of myriad new annuity products and features, it can be hard to keep up. Kent Sluyter, president of Newark, N.J.- based Prudential Annuities, a unit of Prudential Financial, helped shed light on what's going on and what to expect going forward in an interview with Financial Advisor magazine.
Q: What is the current state of the annuities market? And why have industry sales been disappointing lately?
KS: I would describe this as an inflection point. Certainly we saw a drop in overall sales in 2017. A number of things contributed to that, from regulatory headwinds to continual strong equity market performance, which made some people forget that markets can go the other way. ... But expectations for this year are for a slight uptick in sales, maybe in the 5 percent to 10 percent range. That's partly due to some near-term clarity around what the DOL [rule] is not going to be, though we're still not sure exactly what it will be. Also, market volatility in the early part of this year helped reinforce the notion that markets don't always go in just one direction.
That said, the industry still has a challenge in getting past the perception that annuities are complicated and expensive products. We want to help advisors better understand how to fit annuities into their planning.
Q: What do advisors need to know, or remember, about annuities?
KS: A lot of advisors tend to focus on the accumulation-planning needs of their clients, but the demand for income planning has never been greater. The annuity product has unique capabilities that are particularly well suited to at least a portion of the income planning that consumers need.
Of course, in this post-DOL environment, advisors have to be extra diligent around what they're offering and not offering. If we can try to overcome some of the complexity of these products, that might make annuities a little more transparent for advisors and their clients.
Q: One bright spot has been fixed-indexed annuities (FIAs). Why do you suppose they have been the big sellers in recent years, and do you expect that to continue?
Yes, over several years we've seen an uptrend in fixed annuities. They're now overtaking variable annuities. And FIAs represent a significant component of those sales, which is likely to continue.
In fact, Prudential recently introduced our first FIA, called PruSecure Fixed Indexed Annuity. PruSecure FIA is a single-premium annuity with a simple structure and customizable solutions. It was designed in response to consumers' and advisors' wishes for simplification and ease of personalization.