Annuity business: Fire and ice

"With the spreads such as they are, there's definitely an arbitrage situation that exists with FIAs, and now is the time to seize that," Hamlin says.

That arbitrage situation is why, Affronti says, a huge majority of FIA purchasers–85 percent by his estimates–are electing a lifetime withdrawal benefit. What's more, with federal regulators having decided not to pursue rules that would treat index annuities as a security, advisors can move forward in recommending and selling FIAs without that regulatory uncertainty hanging over their heads.

Amid all the buzz about indexed products, there's still a place for traditional fixed deferred annuities in the right situations, Affronti asserts.

"Their returns still blow away what a CD offers, and they offer tax deferral. You can get a 4 percent return on a five-year [fixed annuity], which is great for the conservative investor who's looking to preserve those assets," Affronti says.

New frontiers
Greater regulatory certainty, along with slack sales of traditional fixed products, could spark an influx of new players and new products in the FIA space, Montminy says. Expect manufacturers that historically have emphasized traditional fixed annuities to focus more marketing attention on the FIA market, he says.

On the supply side, also expect manufacturers to explore emerging FIA sales channels, including the registered broker-dealer segment. While the independent advisory channel continues to generate the lion's share of FIA sales, 2010 saw more companies offering indexed products designed for sales by B-D reps, he notes. Suppliers are also moving to make fixed index products more user-friendly with shorter surrender periods, simpler designs and more robust lifetime income guarantees.

The challenge for advisors is how to generate new business from those new products, features and channels. For those seeking to grow their fixed annuity business, Hamlin has three words of advice: Embrace social media. When it comes to advisors using social media tools to tap new annuity business, "It's not 'if,'" he says, "it's 'when.' Every advisor needs to have a social networking or social marketing presence. Those that don't will find it difficult to hold onto the business they have."

Designed and used properly, Hamlin contends, tools such as Facebook landing pages are powerful, cost-effective ways for advisors to access and engage a highly targeted group of prospects. The key, he says, is to engage them tactically–and tactfully–by providing prospects and clients with access to informational audio and video elements on their websites and Facebook pages.

"Advisors need to move away from selling and emphasize educating to add value," Hamlin says. "Keeping that in mind, you can do some amazingly specific target marketing through Facebook in your local area."