RETIREMENT
is a hugely meaningful development for the end consumer , because they ’ re getting such a remarkably better product .”
Among the insurers leading the charge for fee-based products , says Lau , are Allianz , Midland , Security Benefit and Nationwide ( Lau ’ s former employer ). And at DPL , Lau has worked with Orion , Black Diamond and other fee-based platforms to bring annuities to RIA desktops .
“ I talk to insurers all the time , and they assure me they ’ ll be a ‘ fast follower ,’” he says , referring to companies that aren ’ t first to launch new products but usually fast to adopt them when they prove viable . “ Well , everyone ’ s going to be a fast follower . You have to open the gate .”
The Insurers Eyeing The Untapped Market
Corey Walther , president of Allianz Life Financial Services , says in all his time as a former advisor not once did a client come into his office and say they needed to buy an annuity . And yet he feels there has been a very significant shift in consumer demand over the past few years .
“ It ’ s not what the annuity is , it ’ s what it does . It ’ s ‘ MUG ’— mortgage , utilities and groceries . That peace of mind is what people are looking for ,” he says , adding that there are certain risks , like longevity risk , that cannot be diversified away through an investment portfolio .
Allianz , to prove how serious it is in becoming the annuity provider to fee-only advisors , has been developing products and creating dedicated support teams to keep its fee-only business from commingling with its commissionable business . Those efforts include product , training and education , operational support and billing technology .
“ Those are four areas that I feel any company like Allianz needs to execute on to really tap into that potential fee-only advisor market ,” he says . “ So we have fee-only new business teams , dedicated 800 numbers and dedicated staff to help advisors apply for what may be their first annuity ever .”
Those annuities are very similar to the commission products in terms of features , benefits and caps , but the commission — such as a 1 % up-front commission with a 1 % trail that starts the 13th month — has been completely stripped out . Craig Hawley , president of Nationwide Annuity , says for the past 15 years he ’ s tracked the migration of advisors from commission payouts to fee-only practices in the wealth management space , but it ’ s been difficult to move fee-only annuity structures along with them . While Nationwide ’ s fee-only annuity sales to RIAs increased 37 % from 2023 to 2024 , these products represent only 5 % to 10 % of annuities in the industry overall , Hawley says .
But what that means , in Hawley ’ s opinion , is there ’ s a lot more business for the taking . “ There is absolutely an opportunity here . All of our surveys show that over 70 % of Americans want a guaranteed monthly income stream in retirement ,” he says . “ Our success will really come down to how seamlessly we fit our products into an advisor ’ s practice .”
An obstacle to seamless solutions is regulators , who haven ’ t caught up with the product shift .
Another obstacle to seamless solutions is regulators , who haven ’ t caught up with the product shift . The products may be fee-only , but there are still rules to follow : All annuity sales have to be completed by an agent , Hawley says , with a suitability review and lots of paperwork .
“ Someone who ’ s operating as an RIA or a fee-based advisor is used to being a fiduciary for their client . They can buy and sell securities on their behalf , all kinds of instruments ,” he says . “ They don ’ t have the same procedural headache to deal with like they do with the annuity world . That ’ s certainly a piece of the headwind we ’ ve faced .”
Even unintended client taxation has resulted on occasion . For example , one variable annuity product from Nationwide , called Monument Advisor , allows the advisor to manage the underlying investment fund choice . But when advisors first tried to pull out a fee from this product , there was a 10 % tax penalty on the withdrawal if the client wasn ’ t 59 and a half .
“ So we went to the IRS and made them aware of this problem and actually got a private letter ruling that allows an advisor to now take their management fee out of these types of products without a tax penalty ,” Hawley says . “ That ’ s one of the complexities that comes in the fee-based world that don ’ t exist in the commissionbased world .”
Fee-Only Advisors Can Learn To Love Annuities
Curtis Parry is the CEO and founder of Unique Wealth in Clearwater , Fla ., a firm with $ 750 million in client assets . Unique Wealth ’ s niche is retirement income , and he usually first meets with a client roughly five years before they want to retire .
Over the 25 years of his career , Parry has lived in both the commission and the fee-only worlds , stepping into the latter four years ago , using DPL to provide fee-only annuities to the firm ’ s clients . “ It takes away a lot of the perceived conflict of interest ,” Parry says . “ Unfortunately , annuities already have a negative connotation and a ‘ buyer beware ’ feel to them with a consumer . As soon as you bring up that annuity word , things get defensive .”
So rather than present the annuity product as a solution to a client with longevityrisk concerns , Parry says he ’ ll back into the idea by talking about income needs first .
“ I ’ ll ask them how they ’ d feel about guaranteed income , and they ’ ll say , ‘ I love guaranteed income !’” he says . “ I ’ ll talk about how their parents or grandparents might have had pensions and then leave it there , because I want them to say , ‘ Darn it , I wish I could have a pension !’”
From there , Parry feels free to discuss how the client can construct a self-made pension with an annuity that ’ s not overly expensive or convoluted .
“ And we explain we get paid the same whether the client puts the money into an annuity or into stocks and bonds , so we ’ re agnostic . But here ’ s why it ’ s in their best interest in their retirement ,” he says . “ It just opens up their minds tremendously when we can sit on their side of the table .”
50 | FINANCIAL ADVISOR MAGAZINE | MARCH 2025 WWW . FA-MAG . COM