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Financial Advisors Want No-Frills, Low-Fee Annuities

March 19, 2018

RIAs have long avoided annuities, but regulatory and technology trends have attracted many of them to the product in recent years, Insurance News Net writes.

Even so, most RIAs still favor simple low-fee versions, according to the web publication.

“We don’t need sexy, that’s not an appeal,” Karen Van Voorhis, a fee-only advisor with Sapers & Wallack, tells Insurance News Net. She only looks to annuities as a way to provide tax-deferred growth, so the most important aspect of an annuity is low fees, according to the publication.

Todd Curry, an advisor with Second Half Strategies, tells Insurance News Net that advisors don’t need more features in annuities, although he adds they would welcome the ability to “put together features we want, cafeteria style.”

Data cited by the publication show that fee-based variable and indexed annuities had about $2.3 billion in sales in 2017, or just 3.1% of all variable and indexed annuity sales.

Fixed-index annuities could appeal to advisors in light of recent research by Roger Ibbotson, professor emeritus of finance at the Yale School of Management and chairman and CEO of Zebra Capital Management. He finds these vehicles have volatility comparable to bonds while offering better downside protection, according to Insurance News Net.

Another change that could bring RIAs to annuities would be the ability to take the fee out of the annuities themselves instead of a separately managed account, the publication writes.

“I’d like to see a private letter ruling or just an IRS modification on annuities that allows advisors to debit management fees directly from the annuity contract without putting out a 1099-R and having the client pay taxes on the distribution,” Darin Shebesta, an advisor at Jackson/Roskelley Wealth Advisors, tells Insurance News Net.

By Alex Padalka
  • To read the Insurance News Net article cited in this story, click here.