BOSTON -- Annuity sales will remain steady this year, but are expected to tumble in 2017 as the full impact of the Department of Labor's fiduciary rule is felt, LIMRA researchers said.
Speaking today at the 2016 Retirement Industry Conference in Boston, Joseph Montminy, assistant vice president of the LIMRA Secure Retirement Institute, shared the organization's latest projections.
This year, variable annuity sales are expected to decline 15 to 20 percent, he said, but that will be offset by a similar increase in the sale of fixed annuities. But next year is another story.
The majority of the fiduciary rule goes into effect in April 2017, with some aspects delayed until Jan. 1, 2018. That will hurt the market for VAs and FAs, Montminy said. LIMRA sees total annuity sales going down 15 to 20 percent next year, with VAs plummeting 25 to 30 percent, and FAs slipping 5 to 10 percent.
"We see the decline as very significant," Montminy said.
VA sales require a Best Interest Contract Exemption under the fiduciary rule. That means onerous and costly disclosures as well as a contract between and advisor and client. In a surprise move, the DOL added fixed indexed annuities to the BIC in the final version of the rule.
"We're facing a lot of change in this industry and a huge impact on the annuity market," said Todd Giesing, assistant research director with the LIMRA Secure Retirement Institute.
But researchers urged advisors not to lose faith. LIMRA surveys show that 70 percent of carriers expect VA product designs to evolve. Only a quarter of advisors surveyed said they expect to sell fewer annuities.
The market remains huge, Montminy said, with $750 billion worth of guaranteed income needed as more Americans reach retirement age.
"One thing we cannot lose sight of is that the role of the annuity has not changed through this process," he added.