Critiques aside, there is a growing appetite for annuities. A recent study by J.D. Power revealed that customers have begun to bypass advisors and insurance agents to engage more with annuity providers on websites and other digital platforms. And that has helped to drive an increase in overall customer satisfaction.
The bottom line is that the products meet a demand, says Stolz. “People in retirement don’t want to have to worry about whether they are going to run out of money or whether they are going to have unexpected expenses that they can’t cover.”
The supposed complexity of the products requires more education on the advisors’ part, says Lau, but he argues that advisors should be able to understand the products and explain them to clients. At the same time, he says, carriers will need to focus on simplicity when building newer products. They are used to building annuities with special features they can sell, he says. “Let’s bring them back to simple products that people can easily understand and use,” he says. “Because the fundamental structure of annuities has been around since the Roman times. It’s a very good and well-proven structure that has just gotten bastardized by commissions.”
Hanzlik also says simplicity is key. CUNA Mutual Group was one of the early entrants in the registered index-linked annuity space and one of the first to launch the product with a guaranteed living withdrawal benefit, and Hanzlik says the firm has been successful because the products offer a simple-to-use and understand solution.
“Our focus on simplicity, we think, will continue to differentiate us,” he says. “Our RILA solution has been very straightforward, and that’s the feedback we get from advisors. He notes that sales of the firm’s RILA offering with income is up 200% year over year.
As the market for RILAs grows, Giesing says the Secure Retirement Institute is keeping an eye on the guaranteed living benefits added to the product. That’s expected to be an area for growth and opportunity. “Right now, it only makes up about 7% of the RILA sales, but we are starting to see more companies dip their toes into the water.”
The institute is also closely eyeing the fee-based annuity market. It’s something everybody wants to talk about and implement, he says, though nobody wants to put the infrastructure in place. But some of the operational problems faced by distributors, advisors and manufacturers have been alleviated by new technology.
“So we think that there is a potential there that we will see more advisors and distributors switch to fee-based efforts on annuity solutions as we move forward.”