Fixed annuity sales lead the way in second quarter

The current interest rate environment has been evident in annuity sales trends.

Annuities are designed to provide a steady, consistent flow of income in retirement. Taking a cue from its primary function, annuity sales in the second three-month period of the year held constant, according to a newly released report.

Industry-wide annuity sales reached $56 billion during the second quarter."

Across the industry, annuity sales amounted to approximately $56 billion during the second quarter, the Insured Retirement Institute reported from data crunched by Beacon Research and Morningstar. That's on par with the $56 billion in annuities sold between January and March, but slightly lower than year-over-year totals, when purchases amounted to $58.4 billion.

Cathy Weatherford, IRI president and CEO, indicated that with two-thirds of the year down, annuity sales across the industry have already superseded the $100 billion benchmark.

"Industry-wide annuity sales, year to date, are nearly $112 billion," Weatherford explained. "This is slightly above where year-to-date sales were at this point in 2015."

She added that the types of annuities that people have bought thus far, as per usual, have been all over the map. IRI reported from the annuity sales figures how variable annuities from the beginning of April to the end of June amounted to $26.4 billion, while fixed indexed annuities over the same stretch totaled $16.1 billion.

"We fully expect the need for lifetime income to remain strong, though ongoing solution innovation and other factors will likely lead advisors to continue to rely upon a wide array of strategies to solve for their clients' individual needs," Weatherford went on to state.

Low interest rates have buyers taking safe harbor with fixed annuities
When including the fixed annuity market in its entirety, qualified sales totaled $17.1 billion, while non-qualified equaled $12.4 billion, both occurring within the second quarter of 2016.

Todd Giesling, assistant research for LIMRA's Secure Retirement Institute, said that fixed indexed annuities have proven to be more popular with much of the American public because of the low interest rate environment, calling the revenues earned by investors a "safe yield."

"The indexed market is extremely competitive at this time as indexed products remain an attractive alternative to variable annuity products," Giesling explained.

Giesling forecasted that indexed annuity purchases may shatter the record books before 2016 is over and done with.

"Low interest rates have led to fewer variable annuity product purchases."

VA sales down, may slide even further
Meanwhile, VA sales have sputtered, to the point that experts at LIMRA's Security Retirement Institute think that purchase activity will dip to 20 percent lower than where they were at the conclusion of 2015, then potentially a 25-30 percent tumble in 2017 once the fiduciary rule goes live in early April.

Financial advisors will recall that earlier this year, the U.S. Department of Labor announced the expansion of the fiduciary rule, which was originally developed under the Employee Retirement Income Security Act of 1974, or ERISA. The update requires advisors to put their clients' financial interests first and foremost, rather than advisors' bottom line or sales goal. Compliance with this rule won't go fully into effect until April 10, 2017.

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