Will Annuities Recover?
According to the “Fixed Annuity Distribution In 2020,” the demand for securities will strengthen.
“The next decade for annuity distribution will be unlike any other,” the report states. “Commissions will be lower, regulatory supervision will be ramped up to levels that today’s typical annuity producer cannot imagine, marketing organizations will need to change or die, and the financial markets will continue to be volatile and difficult to forecast.”
At the same time, more fixed annuities will be purchased in the decade “than ever before because the fixed annuity value proposition will find a receptive ear in the 57.7 million people that are currently between ages 55 and 75,” adds the report. “Fixed annuities, through creative uses of living benefits, will finally be embraced by the financial community and be used to offer protection against the major uncertainties of retirement.”
“Wall Street could become the main annuity store for consumers because they have the marketing power, the capital, and they can meet a financial behavioral need best expressed by realizing that we buy both insurance and lottery tickets” the report adds. “ Today the ‘insurance need’ in a Wall Street portfolio is met by bonds.” However, it “could also be provided with a synthetic annuity attached to an investment.”
Several of the conclusions reached in the report “are that 1035 exchanges will significantly decline, securities regulators will essentially supervise the fixed annuity world, and that the largest distributors of fixed annuities in 2020 will be broker-dealers and advisory firms.”