Thank You, RIAs Trending Up, How Annuities Move, Speaking of OIDs, RIA PARIS, and The Future—Unbundled

It’s happening. Maybe not as quickly as some are expecting, but it is happening. More folks are going RIA, as fewer are joining the ranks of FINRA-registered broker-dealers. It’s not just about how advisors choose to structure their businesses. Or how their clients want advice delivered. It’s also about the businesses who serve them and who want to serve them. It’s about evolving. And sometimes change is borne of unexpected pressures…like a global pandemic.

Thank You for Choosing RetireOne

In the third quarter of 2021 these advisors began working with us: Harvey Samachson, Laura Sundquist, Josh Street, Christopher Wang, Michael Panico, Kristie Gheysens, Josh Andreasen, Troy Wilson, John Steven Bergquist, Brandi Abrahams, Eric Keating, Charles Scott, Brian Fenn, Yolanda Waters, Eric Johnson, Jeff Busch, Andy Smith, Jeff James, David Shoesmith, and Mark Krehel.

Thank you for choosing RetireOne and welcome to the platform!

the future

RIAs Trending Up

Recent data from FINRA confirms steady RIA firm growth as the number of FINRA-registered firms simultaneously continues to trend down. John Gebauer, president of compliance firm National Regulatory Services believes that growing investor appetite for fee-based financial planning should make advisors bullish about the future when also considering the eventual move to RIAs by younger investors enthusiastically embracing digital trading services.

An important foundation for all of this? The Fees. Advisory pricing is simply more transparent. I wouldn’t argue that commissions are always bad and AUM-based billing is always good, but I would argue that, at its core, selling advice for a fee rather than selling products for commissions incentivizes better advisor behavior.

If your compensation is tied directly to how well or how poorly your clients’ investments perform, then your incentive is to provide advice that improves client outcomes. When they do well, you do well. At its core, this arrangement seems to free the relationship from obvious conflicts of interest. The client knows what they are paying for: advice. And it is clear how much they are paying for that advice.

Our own data confirms the trend to RIA as well: We crossed the 500 policy mark in annuity transition business in Q3. These are annuities that have been earmarked to move from commission structures to fee-based structures but may need to remain until surrender periods are exhausted, for example.

In many of these cases, we partner with advisors transitioning from FINRA registration who aren’t insurance licensed. A RetireOne rep is added to their client annuity policies as “Agent of Record” (“AOR”). The annuity client then simply grants authorization to share annuity data with their advisor, and RetireOne becomes a conduit for management of those assets until they can be fully transitioned to an advisory structure. These advisors understand the necessity of working with an Outsourced Insurance Desk (“OID”) like RetireOne to execute protected accumulation and retirement income solutions for their clients. And they appreciate having an expert to consult with them as they navigate new regulatory territory. Moving annuities when advisors go indie can be a low priority. But leaving them at their former broker-dealer leaves a back door open to their clients that is important to close.

How Annuities Move

Writing for ThinkAdvisor last quarter, RetireOne Managing Director Kevin Hissong and Lotay Yang of Black Card Circle RIA in California address some hurdles these advisors may face as they endeavor to move all of their client assets to a fee-based practice structure from a brokerage practice. Annuities have been tough to move. But, as Lotay and Kevin point out, times have changed, and advisors may no longer need to accept that close to one fifth of their client assets may not make the move with them.

By working with an insurance + annuity platform like RetireOne, advisors going indie may bring annuity assets with them as Advisor of record changes, and/or 1035 exchanges (when and where appropriate).

We launched an advisor portal earlier this year to support our RIA partner firms (going indie, or otherwise). The portal contains client data that can also be accessed from the software platforms where they manage client portfolios and build financial plans. That site, along with our advisory annuity data build, were recognized by in their 2021 industry awards, for which we were finalists in the insurance fintech category.
Connecting to client annuity data allows our RIA firm partners to see the client asset, include it on client statements, manage it, and bill on it (if appropriate). RetireOne effectively acts as a safe harbor for assets that have traditionally been “held away.”

Speaking of OIDs

This past summer, the California Insurance Commissioner fined Jefferson National (owned by Nationwide) after an 86-year-old annuity owner complained that she didn’t understand the variable annuity her Investment Advisor Representative recommended.

This complaint and settlement underscore a vulnerability in the “direct” model that some RIAs follow when referring annuity business directly to insurance companies. And recently enacted RegBI rules governing annuity transactions also require advisors to offer a variety of solutions from multiple providers.

An Outsourced Insurance Desk can offer a broad choice of solutions that comply with industry regulations. It can also provide suitability review to ensure that the OID-recommended solution is not only suitable for each particular client’s needs, but that it serves their best interests.

In that regard, the OID model is the gold standard for RIAs when considering insurance and annuity protections for their clients,. Which, as it turns out, are gaining traction with RIAs…

2021 RIA PARI Survey

In late July we released our joint “2021 RIA Protected Accumulation + Retirement Income Survey” with Protective. Among the findings, we learned that 84% of Investment Adviser Representatives (IARs) of RIAs whose clients own annuities agree or strongly agree that guaranteed lifetime income is more important to them than a fully stocked wine cellar. And of those same advisors, nearly 90% agree that guaranteed lifetime income makes their clients happy and allows their clients to sleep easier.

Overall, we find that advisor resistance to annuities is waning. Only 22 percent of respondents indicate that they would be unlikely or very unlikely to refer an annuity to clients, should their needs be addressed by the features of an annuity. That’s down 11 points from 2020.

Though there have been advisory solutions for more than 15 years, a persistent focus on creating and supporting advisory solutions has only been established in the last 3 – 5 years among a large group of issuers. Advisory solutions, built primarily on the reputation of stripped-down investment-only variable annuities, have grown to include VAs with GLWB, fixed index annuities, registered index-linked annuities, and SPIAs.
More players bringing more solutions to the market means increased competition. As a result, product development is evolving to rapidly meet the needs of RIAs and their clients. Liquidity, lower cost, simplicity, billability (is that a word?) and transparency are the core benefits of modern advisory solutions built to meet the fiduciary standard of care. Awareness appears to be growing, and as connectivity improves (see “How Annuities Move” above) advisory solutions are easier to implement in client financial plans.

So where will the next big innovation happen?

The Future is Unbundled

In August, I wrote about coming insuretech innovation in‘s “2021 Mid-Year Outlook.” As we face what some folks are calling “Peak 65,” a vast population of Americans will need to figure out how to pay themselves in retirement. Lifetime income in the form of annuities presents one of the most obvious solutions. But adoption of traditional annuities for income has been relatively low for myriad reasons.

Could insurance technologies help improve client outcomes, simplify income solutions, and meet the needs of more retirees who lack the experience or expertise to manage longevity risk on their own? We think so. 

Next quarter, we’ll have lots more to share about our latest innovation: a Portfolio Retirement Income Guarantee designed to help RIAs do what they do best (manage money), and allow insurance companies do what they do best (manage risk).

View On-Demand Webinars from Q3

  1. Like Ships Passing in the Night: Results of the 2021 RIA PARI Survey
    Lauren Drapeau of Protective joined me for this Advisor Perspectives Thought Leader Summit 2021 presentation. We explore the results of RetireOne/Protective 2021 RIA Protected Accumulation + Retirement Income Survey and share insights into how RIAs are leveraging annuity protections in client portfolios.
  2. Webinar: Insights from the 2021 RIA Protected Accumulation + Retirement Income Survey
    Protective’s Lauren Drapeau and I discuss how advisory annuity innovations are impacting RIA firms and their clients, how RIA firms are reacting, and what impact advisors think lifetime income has on their client’s well-being.
  3. Webinar: Planning for the Biden Tax Regime
    Harry Bartle from LifeYield, and Jeffrey R. Clark from Jackson join RetireOne’s Kevin Hissong to discuss the Biden administration’s tax reform proposals, and how advisors may help clients plan for and reduce the impact of potential tax hikes.

Best Wishes,

Stone Signature
David Stone
Founder and CEO