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Overcoming Barriers to Annuity Sales


Matthew Drinkwater, Ph.D., FSRI, FLMI, AFSI, PCS
Corporate Vice President, Annuity and Retirement Income Research

March 2023

Investment advisor representatives (IARs) working exclusively for registered investment advisory firms (RIAs) manage or advise a large proportion of individual investors’ assets (about $18.9 trillion as of 2021), with most assets owned by high-net-worth (HNW) clients.[1] RIA advisors serve a wide variety of clients, but because their business model usually relies on assets under management, wealthier clients are often overrepresented compared with the clientele of other types of financial professionals, such as insurance agents or brokers. Because wealth in the United States is concentrated among older households (about two-thirds of assets are controlled by households aged 55 and older), it follows that a large proportion of their clients will be retired or near retirement. Moreover, compared with younger investors, pre-retirees and retirees tend to have more complicated financial situations that may necessitate the expertise of financial advisors.

Among the most crucial retirement challenges faced by RIA advisors’ clients is the generation of sustainable income. More and more Americans are reaching retirement with substantial nest eggs, yet without enough lifetime-guaranteed income, exposing them to longevity risk. In addition, wealthier clients will seek tax-efficient ways to invest. And, in the face of increasing market volatility and other economic conditions, the need for downside protection has risen in recent years.

Individual annuity products represent a solution to these difficulties faced by pre-retiree and retiree clients of RIA advisors. All annuities can provide lifetime-guaranteed income, deferred annuity account balances accumulate free of taxation, and most deferred annuities offer a form of full or partial downside protection. Clearly, these features are increasingly in demand; sales of annuities reached record levels in 2022. However, the vast majority of these annuities were sold by brokers, agents, and other financial representatives who were compensated with commissions.

In recent research, LIMRA and EY found that a majority of advisors working at RIAs, who typically receive no commissions, report no income from annuities (Figure 1).[2] Among those with income, they represent about 11 percent of their income on average. Advisory services, including asset management and fee-based financial planning, are by far the largest source of income, representing nearly 8 in every 10 dollars of revenue. Clearly, most RIA firms today do not rely on annuities for their revenue, suggesting that significant expansion is possible, if the barriers can be overcome.

Figure 1 — Income From Sale of Annuities

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In terms of production, annuity-selling advisors at RIAs sold an average (median) of 10 (4) annuity contracts in 2019. Two years later, these advisors sold an average (median) of 11 (5) annuity contracts in 2021. While the increase is encouraging, a majority (53 percent) of annuity-selling RIA advisors reported that the number of annuity contracts they sold in 2021 was the same as, or lower than, the number they sold in 2019, signaling the need for more rapid progress.

Barriers to Adoption

Several barriers to broader acceptance of annuities are cited by advisors working at RIAs. Advisors for whom annuities represent 25 percent or less of their income (which was virtually the entire group surveyed) were asked why annuities are not a larger part of their business. The most commonly mentioned top three reasons were: advisor can provide greater value to clients for the same cost using other investments, not appropriate solutions for their clients, and annuities being too complicated for their clients (Figure 2). These were also among the top single most important reasons for annuity income not representing a larger share of their income. A smaller proportion of advisors cited a firm-wide stance where the RIA itself offers few or no annuities.

Figure 2 — Why Annuities Are Not Larger Part of Business

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Interestingly, advisors didn't often blame cumbersome order-entry systems, burdensome post-sale servicing processes, lack of support tools to help identify appropriate solutions for their clients, not knowing the products well enough to discuss with clients, the lack of portfolio integration with their firms' planning/modeling tools, or an onerous sales process. It's to be expected that individuals with little or no experience with annuities would not object to the specifics of the sales process, such as order-entry systems and support tools.

These findings suggest that advisors’ more fundamental objections to greater use of annuities in their practices will need to be overcome by carriers first, rather than focusing solely on improving the mechanics of selling annuities. If carriers can explain how annuities provide unique value beyond what can be obtained through other investments, and why they are therefore appropriate solutions for RIA clients, then uptake should improve. Combined with greater availability of fee-based annuities and the rise of outsourced insurance desks, the future looks bright for RIAs to be able to expand the role of annuities in their practices.


[1] Source: Investment Adviser Industry Snapshot 2022, Investment Advisor Association, 2022.

[2] Findings based on an online survey, conducted in January through May of 2022, of more than 900 experienced financial professionals from six common insurance, investment and advisory practice models. Respondents had a minimum of three years of sales experience in the industry and met minimum income thresholds for their practice models. Of the 185 financial professionals who identified their firms as RIAs, 137 were exclusively investment advisor representatives (IARs), 40 were dually-registered as IARs and registered representatives of broker-dealers, and the remaining 8 were other types of advisors. For additional findings, see