Numbers are telling a new story

Numbers are telling a new story

Our industry story used to read something like this: Markets are up and so are variable annuity sales or rates are up and so are fixed annuity sales. Today, it’s the opposite: The market is up while variable sales are down, and rates are down while fixed annuity sales are up. 

The numbers don’t lie. A recent LIMRA Secure Retirement Institute report showed total fixed annuity sales up 34 percent from last year, while variable annuity sales fell 5 percent. Fixed indexed annuities set a new quarterly record of $13 billion, up 40 percent over sales last year, capturing 52 percent of the total fixed annuity sales for the first time ever.  

It appears this is a new twist on our old story. So when I first saw this data, I asked many questions:

  • With rates so low and the market on the rise for nearly five straight years, who would possibly be interested in a fixed annuity? 
  • Why aren’t variable annuity sales through the roof?
  • Do the sales of the advisors I work with fall in line with these numbers? 
  • Is this the start of a real trend? Or is this just another fad in the financial services industry?  

Let’s review a couple of basic truths to see if we can reveal some answers.

  • The aging population still doesn’t feel safe in the market. 
  • Even after a prolonged attempt by the Fed to force investors into riskier assets, there’s still nearly $10 trillion on the sidelines in the form of CDs and money market accounts.
  • Added to the $3.5 trillion in short-term bond funds, we have nearly the same amount of money in safe asset classes (earning less than 1 percent per year) as we have in 401(k)s and IRAs combined.

In talking with the advisors I work closely with, I’ve come to realize that their numbers do in fact fall in line with the LIMRA numbers, and many of them are having their best years ever. They’ve embraced the concept that some people are investors while others are savers. Savers will never become investors, no matter how hard the Fed pushes, and they’re starved for safe alternatives. Advisors who are truly listening to the desires of the savers say they’re having a real impact on their business and their clients.

Is it a fad? Well, most fads have faded out after five to 10 years, and this movement just seems to be getting started. In fact, it looks like it could go parabolic over the next decade, especially as many of our investors look to become maintainers. So I guess the real question is: If you’re not making fixed and fixed indexed annuity sales to your clients, then who is?

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